State of DeFi Index

The recent crypto market downturn has led to extensive detrimental effects on blockchain market health – specifically on Decentralized Finance. A long-standing DeFi primitive, however, started to gain traction. DeFi indices offer products that hold a similar role to that of an ETF for traditional markets. In buying these products, customers are directly exposed to multiple cryptocurrencies without the hassle of purchasing individually.

$INDEX (Governance of Index Coop)

$NDX (Governance of Indexed Finance)

$DOUGH (Governance of Pie Dough)

Of these DeFi indices, the most prevalent ones are Index Coop, Amun, Indexed Finance, DeFi Pulse, and Pie DAO. These are the DeFi indices that are on-chain. Meaning that when you buy the product, your capital won’t be transferred to any 3rd parties but it is directly exchanged for the basket of cryptocurrencies. This article is going to specifically look into Index Coop and one of its products.

Index Coop offers 15 baskets of products: 7 of which are solely buying the cryptocurrencies across various blockchain subsectors and the other 8 are leveraged tokens. The platform’s highest market cap product is DeFi Pulse – following the performance of major DeFi assets across the market, followed by a leverageable collateralized debt position – ETH2x-FLI, then icETH – an interest compounding stream that enhances staking returns.

• Looking specifically at the distribution, Index Coop has DPI as the highest number of unique customers; given that DPI is the first index recorded in Index Coop. However, a quick look at the market cap for DPI and MVI are $26.45M and $6.16M respectively. Presenting a disconnection between MCAP to address exposure: on a $1,613 (DPI) and $591 (MVI) per user.

• Complementing the previous chart, most of the customers buy only 1 product from Index Coop.

• Interestingly, the most revenue-generating product for Index Coop is ETH2x-FLI instead of DPI. This could be attributed to ETH2x-FLI having two fees that contribute to 120% of the total revenue from the product – Streaming fee 1.95% (60%) and Mint/Redeem fee 0.1% (60%).

• When the crypto bear market started in mid-Nov 2021, Index Coop followed accordingly through its net in/outflow. Despite all the bear sentiment, the outflow did not outweigh the capital going in. Most of the funds have been invested in the pre-bear market. Indicating that during bear market Index Coop might be sustainable but with less trading activities.

• Looking specifically in DeFi Pulse Index, the index has seen a huge skyrocket from the month Jan to Feb 2021. The cause might be the rebalancing of several projects in early January. (source: here)

• This increase of address exposure could be credited to the choice of tokens that DeFi Pulse invests the capital on. The product spreads the capital across 130 different cryptoassets, each with their own weight. The top 10 crypto assets are top-tier amongst the DeFi market itself.