CoinMarketCap is getting into the investment space — and has launched a token that offers exposure to the world’s biggest cryptocurrencies.
As the name suggests, the CMC20 token keeps track of the top 20 digital assets by market capitalization. Stablecoins and wrapped tokens are excluded from this rundown, as well as privacy coins like Monero that have been banned in some jurisdictions.
It’s part of a collaboration with Reserve Protocol, which has billed this new index as a modern-day alternative to the S&P 500 in the U.S.
The timing of the CMC20 token launch was unfortunate to say the least. It came on a day Bitcoin slid below $90,000 for the first time in almost seven months, with Ether back under $3,000 as the crypto markets contract.
In fact, those who had snapped up CMC20 tokens would actually have lost 4.73% in 24 hours — considerably more than the 4.18% drop seen across the market capitalization of the entire sector.
As you might expect, this index is heavily weighted in favor of the four biggest cryptocurrencies: BTC, ETH, XRP, and BNB.
It’s rebalanced at the start of every month, and here’s how the current composition looks.
The index was initially given a base of $100 back on January 1, 2024 and was trading at $192.93 at the time of writing — in other words, rising by close to 93% so far. Bitcoin has surged by about 107% over the same period, with Ether jumping by a less impressive 29%.
Amid fears that another crypto winter is upon us, the CMC20 token is basically flat compared with 12 months ago — and has plunged by 29.5% from its yearly high of $275.48 on October 6, which coincided with a new record price for Bitcoin.
When the index itself was first unveiled back in September, pre-empting the token, CoinMarketCap’s CEO Rush Luton had said:
“The CMC20 index is a powerful addition to our existing suite of benchmarks, designed to give users a more practical and investable view of the top crypto assets, and a simple way to gain exposure to the broader market.”
One of the biggest limitations of the top indices on Wall Street — and the exchange-traded funds that track them — lies in how they only trade during business hours. By contrast, CMC20’s value is updated every five seconds, and tokens can be bought and sold 24/7.
The crypto industry specifically has also faced challenges, especially surrounding fragmentation. A meme coin boom means tens of thousands of tokens are now created on a daily basis — with millions of digital assets in existence. Executives behind CMC20 say:
“Navigating the landscape has never been more complex. For most investors, picking individual winners is time-consuming, risky, and impractical.”
It’s going to be interesting to see how much traction the CMC20 token gets among investors — especially crypto natives who may prefer to own the underlying assets themselves. Demand often dries up in a bear market, and as data from SoSoValue shows, outflows from spot Bitcoin ETFs have risen dramatically in the past month.
Another threat on the horizon for CoinMarketCap comes in the form of competition from traditional financial giants — including the creator of the S&P 500 index that it’s trying to emulate.
The S&P Digital Markets 50 Index, otherwise known as DM50 for short, is currently in the works. However, this won’t purely track digital assets, as it will also offer exposure to major publicly traded companies in the crypto space such as Strategy and Coinbase.
And while the Securities and Exchange Commission has been dragging its heels when it comes to approving altcoin ETFs, their eventual approval could pave the way for asset managers to offer multi-coin funds of their own — potentially making CMC20 tokens less appealing by comparison.
Nonetheless, CoinMarketCap and Reserve appear confident, arguing that their new product isn’t reliant on centralized entities and is based on “battle-tested DeFi infrastructure” that has undergone multiple security audits. They added:
“Crypto has reached a pivotal moment. Institutional adoption is accelerating, regulatory clarity is emerging, and digital assets are becoming a core part of diversified portfolios worldwide. But the tools to invest intelligently haven’t kept pace. Until now.”
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