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Binance Digital Asset Indices Methodology
Table of Contents
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1. Introduction to Binance Digital Asset Indices
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1.1 Overview
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1.2 Indices
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1.3 Pricing and Reference Data Source
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1.4 Disclosures
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2. Construction Methodology
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2.1 Eligibility Criteria
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2.2 Filtering Criteria
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2.3 Liquidity Criteria
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2.4 Ranking
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2.5 Selection
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2.6 Weighting
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2.7 Index Maintenance
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2.8 Index Rebalancing
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2.9 Base Date, History Availability and Currency of Calculation
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2.10 Index Calculation
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2.11 Index Dissemination
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3. Policy
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3.1 Market Disruption Events
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3.2 Digital Assets Suspension or Delisting
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4. Governance
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4.1 Governance Committee
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4.2 Governance Responsibilities
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5. Disclaimer
1. Introduction to Binance Digital Asset Indices
1.1 Overview
Binance Digital Asset Indices are a suite of indices that track the performance of their underlying digital assets using various construction methodologies.
The suite of indices aims to provide representable and transparent benchmarks that track the overall digital asset and cryptocurrency markets.
Binance Digital Asset Indices are constructed with robust and industry standard index calculation methodologies and rebalancing approaches.
1.2 Indices
Binance CoinMarketCap(CMC) Top 10 Equal-Weighted Index
Binance CMC Top 10 Equal-Weighted Index aims to track the performance of the top 10 digital assets by market capitalization, relative to the base currency of USD. The basket of 10 digital assets is equally weighted and is rebalanced on a monthly basis. The index currency is USD.
The market capitalization of a digital asset is calculated by multiplying its reference price in USD by its current circulating supply at a specific time of the day. All times used in this document are UTC+0 time.
1.3 Pricing and Reference Data Source
Binance Digital Asset Indices use CoinMarketCap, a cryptocurrency data provider, as the data source for digital asset pricing.
For more information on CoinMarketCap, please refer to CoinMarketCap website, https://coinmarketcap.com/.
1.4 Disclosures
No communication or information provided in this document, or any Binance Digital Asset Indices, is intended as, or shall be considered or construed as, investment advice, financial advice, trading advice, or any other sort of advice. This material does not constitute recommendation or an offer or solicitation to purchase or sell securities, and does not constitute investment advice with respect to any securities. CoinMarketCap makes no representation or recommendation regarding the eligibility or suitability of any products linked to the index for investment.
Data and information are provided for informational purposes only, and are not intended for trading purposes. CoinMarketCap as the data source of digital asset pricing gives no warranty, express or implied, as to the accuracy, reliability, utility or completeness of any information contained in this document.
You are solely responsible for determining whether any investment, investment strategy or related transaction is appropriate for you according to your personal investment objectives, financial circumstances and risk tolerance. Before making the decision to buy, sell or hold any digital asset, you should conduct your own due diligence and consult your financial and/or taxation advisors.
Binance, as defined in our terms of use, may hold interests in digital assets in Binance Digital Asset Indices from time to time.
Binance Capital Management, the subsidiary of Binance, acquired CoinMarketCap in April 2020.
2. Construction Methodology
2.1 Eligibility Criteria
Digital assets that may form part of the Binance Digital Assets Indices are those that are listed on both https://binance.com, the Binance Exchange Platform, and https://coinmarketcap.com/, the CoinMarketCap. This includes any digital asset listed on both the Binance Exchange Platform and CoinMarketCap, regardless of the listing base currency. If the base currency of the digital asset is not the same as the index currency, the cross-currency conversion will be applied across (BTC / index currency) to obtain a quote of the (digital currency / index currency).
2.2 Filtering Criteria
Digital assets will only form part of Binance Digital Asset Indices if they satisfy the following filtering criteria:
have been listed on the Binance Exchange Platform and CoinMarketCap for at least 30 days;
are not wrapped, pegged to another digital asset, non-digital (Fiat) currencies, group of those currencies, or physical assets;
are not algorithmic stablecoins;
does not include CoinMarketCap Top Memes Tokens by Market Capitalization https://coinmarketcap.com/view/memes/.
2.3 Liquidity Criteria
Digital assets will only form part of Binance Digital Asset Indices if they satisfy the following liquidity criteria:
Average Daily Trading Volume
$${ADTV_t} \geqslant {ADTV_{0.25}}$$
Where
\(\mathbf{ADTV_{0.25}}\): The 25th percentile of the average daily traded volume of all eligible digital assets over the past rebalancing period.
\(\mathbf{ADTV_{t}}\): The average daily traded volume of a single digital asset over the past rebalancing period.
2.4 Ranking
All eligible digital assets will be ranked by the 7-day average market capitalization (quoted in USD), as of the index rebalancing date.
2.5 Selection
The top 10 digital assets will be included in the index at each rebalancing according to the following process:
1. Rank the digital assets by market capitalization, with the highest ranked 80% of the basket size of the respective index automatically selected for inclusion.
2. Current digital assets ranked in the top 120% of the basket size of the respective index are selected until the basket size is met.
3. If the basket size is still not met, the highest-ranking non-constituent digital asset is selected and added to the index until the basket size is reached.
2.6 Weighting
Binance CMC Top 10 Equal-Weighted Index is an equally-weighted index. For this index, each underlying digital asset maintains a constant index weight of 10%.
2.7 Index Maintenance
Index Maintenance includes monitoring and implementing the adjustments due to hard forks, airdrops, mapping and / or other actions. The treatment of such actions will be evaluated by the Governance Committee from the qualitative and quantitative characteristics of each component digital asset.
2.8 Index Rebalancing
The indices rebalance monthly with the index rebalancing date on the fourth Monday of every month, and the data used for all the rebalance procedures will be before 0:00 UTC+0 of the rebalancing date. The publication date of the new rebalance selection is the first Wednesday immediately after the index rebalancing date. The implementation date of the new rebalance selection is the first Friday immediately after the index rebalancing date.
On the index rebalancing date, the index rebalancing process is applied in the following order:
Determine the eligible digital assets as per Section 2.1.
Apply filtering criteria as per Section 2.2.
Apply the liquidity criteria as per Section 2.3.
Rank the eligible digital assets as per Section 2.4.
Select the index underlying digital assets following the rules of Section 2.5.
Weight the index underlying digital assets as per Section 2.6.
The new selection of digital assets, and corresponding weights, become effective on the implementation date immediately following the rebalancing date.
2.9 Base Date, History Availability and Currency of Calculation
Index history availability, base dates, base values, and calculation currency are shown in the table below.
IndexLaunch DateFirst Value DateBase DateBase LevelCurrency
Binance Top 10 Equal-Weighted
14 Oct 2022
22 Sep 2022
22 Sep 2022
1000
USD
Index
Binance Top 10 Equal-Weighted
Launch Date
14 Oct 2022
First Value Date
22 Sep 2022
Base Date
22 Sep 2022
Base Level
1000
Currency
USD
2.10 Index Calculation
Index Returns
There is a single component to the index returns; the performance (appreciation / depreciation) of the underlying digital assets relative to the index currency.
Daily Index Calculation
All equal-weighted indices are calculated in accordance with the formula below.
$${\it {Index\ Level}_t} = {\it Base\ Level} \ast \left( \sum_{i=1}^n w_{{t_0},i} \ast \frac{s_{t,i}}{s_{{t_0},i}} \right) / {\it divisor_t}$$
Where,
\(\mathbf{{Index\ Level}_t}\): Index level as of time t.
\(\mathbf{Base\ Level}\): Index level as of the base date (t=0).
\(\mathbf{w_{{t_0},i}}\): Weight of the \(\ i^{t_h} \) underlying digital asset as of the latest rebalance time, \(t_0\).
\(\mathbf{s_{t,i}}\): Spot rate of the underlying digital asset as of time t, measured as (index currency / digital currency).
\(\mathbf{s_{{t_0},i}}\): Spot rate of the underlying digital asset as of the latest rebalance time \(t_0\), measured as (index currency / digital currency).
\(\mathbf{n}\): Number of underlying digital assets in the index.
\(\mathbf{divisor_t}\): index divisor at time t which is used to maintain the continuity of the index level independent of rebalancing.
The index divisor is calculated as follows:
At the index base date (t=0), the divisor is initially fixed at 1, that is, \({\it divisor_0}\)=1. Subsequently, the divisor at any time t remains the same unless there is an index rebalancing. When an index rebalancing happens, an adjustment is triggered and the divisor is recalculated according to the formula
$${\it divisor_a} = {\it divisor_b} \ast \left( \sum_{i=1}^n w_{{t_a},i} \ast \frac{s_{a,i}}{s_{{t_a},i}} \right) / \left( \sum_{i=1}^n w_{{t_b},i} \ast \frac{s_{b,i}}{s_{{t_b},i}} \right)$$
, where b and a denote before and after the event of rebalancing. And ta, tb mean the latest rebalancing times before time a and time b respectively.
2.11 Index Dissemination
The index levels will be calculated and published every 60 seconds.
The index will be active and calculated live during all trading hours of the Binance Exchange Platform.
The daily index “close levels” is defined to be the index level as of 24:00 UTC Time. This time is synced with the rest of the Binance Exchange Platform in terms of daily closing levels of all tradable products.
The index levels publication, performance, as well any index related information / documents, will be available on https://binance.com/en/support/announcement.
3. Policy
3.1 Market Disruption Events
A market disruption event is any unscheduled event that could potentially impact the calculation and/or the publication of any of Binance Digital Asset Indices. The unscheduled events may be attributed to issues such as data sources, internal operational issues, publication delivery issues or extreme volatility.
In the case of the occurrence of such events, there may be a temporary halt to the index calculation.
3.2 Digital Assets Suspension or Delisting
If any digital assets are suspended or delisted from the Binance Exchange Platform, impacted indices will be made insensitive to the suspended or delisted underlying digital asset.
For the case of a suspended underlying digital asset, the underlying digital asset will be reviewed on a case-by-case basis to determine if the underlying digital asset should be permanently removed from the index underlying digital assets basket.
In the case of permanent removal of an underlying digital asset from an index. The index calculation will be made insensitive to such an underlying digital asset. The Binance Index Governance Committee will review and decide whether the next most eligible new digital asset will be added to the index immediately, or if the underlying digital asset replacement will take place in the following rebalance period.
4. Governance
4.1 Governance Committee
The Binance Index Governance Committee seeks to meet on a quarterly basis to review all the index methodologies. The Committee may conduct additional meetings in circumstances deemed necessary. The members of the committee must declare any potential conflicts of interests that may influence, in any way, their opinions and/or decisions during any committee meetings.
4.2 Governance Responsibilities
The Binance Index Governance Committee is responsible for:
Monitoring operational adherence to the rules set in this document.
Reviewing the index construction rules set in this document. The review will consider internal operational feedback, the viability of the data sources, and market participant’s feedback.
Reviewing new regulatory development that may impact the index objectives and/or construction rules.
Reviewing and approving every new Binance Digital Assets index, index objective, construction methodology, transparency, and robustness.
Decision-making in response to market disruptions.
Decision-making in response to digital assets suspension or delisting.
Determining if it is necessary to recalculate and/or restate any index levels.
Determining if there is a need to change any rules of the index methodology.
All Binance Index Governance Committee discussions are confidential, as Binance considers information about changes to its indices and related matters to be material and potentially marketing moving.
Binance Index Governance Committee reserves the right to make exceptions in the treatment if the need arises. In any scenario where the treatment differs from the general rules stated in this document, a notice will be published at https://binance.com/en/support/announcement, when reasonably possible.
5. Disclaimer
These materials, any Binance Digital Assets Indices, index data, analyses, research, model, software or other application or output (“Content”), have been prepared solely for informational purposes based upon information generally available to the public and from sources believed to be reliable. Although we intend to provide accurate and timely information, we do not warrant that it will always be entirely accurate, complete, or current, and they may also include technical inaccuracies or typographical errors. In an effort to continue to provide you with as complete and accurate information as possible, information may, to the extent permitted by applicable law, be changed or updated from time to time without notice.
You should verify all information before relying on any Content, and all decisions based on the same are your sole responsibility. The Content is produced on an “as is” and “as available” basis without any representation or warranty, whether express or implied, to the maximum extent permitted by applicable law. Binance, and Binance Affiliates (as those terms are defined on our website https://binance.com/en/terms) disclaim any implied warranties of title, merchantability, fitness for a particular purpose and/or non-infringement. We do not make any representations or warranties that any Content, or its communication, will be continuous, uninterrupted, timely, or error-free.
In no event shall Binance or a Binance Affiliate be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Content, even if advised of the possibility of such damages.
It is not possible to invest directly in Binance Digital Asset Indices. Index returns do not represent the results of actual trading of Digital Assets. Index returns do not reflect payment of any sales charges or fees. The imposition of these fees and charges would cause the performance of an index to be different from the performance of Binance Digital Asset Indices. Binance and Binance Affiliates makes no assurance that any index related investments or accounts will accurately track Binance Digital Asset Indices or provide positive investment returns.
Digital asset prices are subject to high market risk and price volatility. The value of your investment may go down or up, and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance, and Binance Affiliates, are not liable for any losses you may incur. Past performance is not a reliable predictor of future performance. You should only invest in products you are familiar with and where you understand the risks. You should carefully consider your investment experience, financial situation, investment objectives and risk tolerance and consult an independent financial adviser prior to making any investment. This material should not be construed as financial advice. For more information, see our Terms of Use and Risk Warning. Binance and Binance Affiliates are not an investment adviser, fiduciary or agent.
Binance and Binance Affiliates provides a wide range of services. There may be instances where your interests conflict, and you permit Binance and Binance Affiliates to act in their own interests. Binance and Binance Affiliates are not under any obligation to account to you for any profit, commission or remuneration arising out of or from the publication of any Content.
The Content may not be modified, reverse-engineered, reproduced or re-disseminated in whole or in part without prior written permission from Binance, its Affiliates, or CoinMarketCap. The Content may not be used to create derivative works or to verify or correct other data or information including being used to create other indexes, databases, risk models, model portfolios, analytics, software, or in connection with the issuing, offering, sponsoring, managing or marketing of any Digital Assets, portfolios, financial products, other investment vehicles or separate accounts utilizing or based on, linked to, tracking or otherwise derived from the Content, or any other products or services offered by Binance or Binance Affiliates.