Hashdex
Hashdex
The Nasdaq Crypto Index is designed to measure the performance of a material portion of the overall
digital asset market. Digital assets are eligible for inclusion in the Index if they satisfy the criteria set
forth under “Index Eligibility”. The Index periodically adjusts Index Constituents and weightings to
reflect changes in the digital asset market.
DIGITAL ASSET ELIGIBILITY CRITERIA
While investing in digital assets represents a unique opportunity for capturing returns linked to a new
asset class, it also presents the challenge of ensuring that digital assets considered for the Index meet a
minimum standard of liquidity/trading volume, security, credibility, exchangeability, and fungibility. In
order to ensure that the Index remains neutral and passive and that it only considers digital assets that
meet these standards, the Index has predetermined criteria by which digital assets are periodically
assessed for eligibility.
The universe of eligible digital assets will be determined based upon the criteria listed below:
1) Have active tradable markets listed on at least three Core Exchanges (as defined herein) where
executions incur fees for market participants for the entire period since the previous index
reconstitution.
Exchanges trading digital assets provide data used by the Index to support a number of
fundamental tasks, including price discovery and liquidity measurements. The rules defining the
list of Core Exchanges are meant to select exchanges aligned with the broad economic realities
the Index seeks to represent.
2) Be supported by at least two Core Custodians (as defined herein) for the entire period since the
previous index reconstitution.
Digital assets exist within the codebase of an underlying software protocol. Accordingly, digital
assets require special services to hold them in storage. Eligible digital assets must have a secure
institutional custody solution by a licensed and reputable service provider. This type of service is
INDEX METHODOLOGY
2
essential to facilitate the implementation of the index by investment funds, which hardly have
the technical expertise to safely self-custody digital assets.
The requirement that a digital asset have a secure institutional custody solution at two
custodians results in a digital asset pool with superior market maturity. Custodians usually
evaluate security and legal risks, as well as market demand, when deciding to provide custody
services to an asset. Requiring an asset to pass the vetting process of two custodians builds a
robust eligibility criteria. The restriction also makes the index more investable as competition
between the different custody providers tend to drive prices down, which helps avoid excessive
costs for funds replicating the index.
3) To be considered for entry to the index at any Index Reconstitution an asset must have a median
daily trading volume in the USD pair conducted across all core exchanges that is no less than
0.5% of the cryptocurrency asset that has the highest median daily trading volume. This is
measured during the first 40 calendar days immediately following the previous reconstitution
and rebalance day. Where an existing index constituent falls below this threshold its trading
volume shall be assessed by the index committee for potential removal from the index.
The liquidity rule is meant to improve investability, thereby putting funds replicating the index in
a better position to find enough liquidity in the Core Exchanges to trade all desirable assets
without having much impact on pricing, i.e., it ensures a minimum level of price discovery and
liquidity for the digital asset to be considered tradable and priced in a way that should accurately
reflect its market value.
4) Have free-floating pricing (i.e., not be pegged to the value of any asset).
The index excludes digital assets that are pegged to the value of other assets, through fiat or
crypto collateralization, algorithmic strategy or any other means.
If a digital asset meets requirements (1) through (4), it will be considered eligible for Index inclusion (an
“Eligible Digital Asset”).
Notwithstanding inclusion in the eligible list, the Nasdaq Cryptocurrency Index Oversight Committee
(“CIOC”) reserves the right to further exclude any additional assets based on one or more factors,
including but not limited to its review of general reputational, fraud, manipulation, or security concerns
connected to the asset.
The Index will assess any digital assets resulting from a hard fork or an airdrop under the same criteria as
established digital assets and will only include a new digital asset if it meets the eligibility criteria set
forth above.
