Crypto traders are always searching for the next meta: an emerging narrative, use case, or craze that’s just getting started. It could be a new network that’s launched; a new token type; or even a subtrend within an existing sector, such as a fad for launching a particular style of memecoin.
To this long list of emerging trends currently seeing increased traction you can add crypto indexes. It’s too early to tell if they’re poised to become the next meta – a craze that prompts 1,000 copycat projects and attracts onchain traders in their droves. But this much can be said for certain: the number of markets they now cover has expanded rapidly in recent months. Soon, DeFi users may be able to trade entire markets in one click through accessing a single index token. The tech to support this is already here. But what about the demand?
Crypto Indexes Come of Age
Indexes are commonplace in traditional finance, where they’re used to provide benchmarks for stocks, commodities and other global markets. They’re both a means of measuring the market’s performance over time and a system for directly trading it for those who wish to invest in the index.
In a crypto context, indexes work exactly the same – even tracking the same assets and markets in many cases. The primary difference is that in the case of onchain indexes, it’s possible to trade them with no custodial risk. This makes them an attractive proposition to DeFi users, who can trade tokenized indexes representing crypto tokens, precious metals, and other real-world assets without needing to rely on third parties to manage their money.
The case for crypto indexes is compelling. But it remains to be seen whether we’re on the verge of a veritable cambrian explosion of onchain indexes or whether they’ll remain limited to a handful of sectors such as RWAs, DeFi, and AI. One of the latest indexes to be launched, courtesy of financial data provider Truflation, fits into this bracket: its Hedge Index contains a weighted basket of RWAs and currencies including BTC. Initially, it can be used as a benchmark – alternative markets from Housing Inflation to Palladium Futures can easily be overlaid – but Truflation is planning to make its Hedge Index fully tradable onchain.
Truflation is not alone in provisioning onchain indexes to crypto users. Index Coop offers a selection of products including one that comprises a basket of tokens for the leading DeFi protocols. There are also indexes such as ETHMAXY that essentially serve as a leveraged bet on the performance of an asset like ETH or BTC. These index tokens work in a similar manner to the ETHUP or BTCDOWN tokens that some CEXs offer – the difference being that it’s all done onchain.
Tracking the Growth of Crypto Indexes
Who indexes the indexers? Right now, very few dashboards are dedicated to monitoring the availability and growth of crypto indexes. Thankfully, DefiLlama, who seem to have a dashboard for everything, have stepped up and are tracking almost 60 onchain indexes with a TVL of almost $675M. However this dashboard doesn’t include the many other indexes that are relied on by traders to benchmark a particular sector and serve as an investment guide, even if they’re not being directly traded.
What is clear is that the growth of onchain indexes is correlated with that of RWAs. As real-world assets have become more easily available on blockchain rails, and incorporated a wider range of assets, indexes have inevitably sprung up to cater to the needs of this fast-growing sector. Given that many of those trading tokenized RWAs hail from TradFi, it’s natural that they should seek to trade indexes, an investment vehicle with which they are well accustomed.
But it would be a mistake to think that crypto indexes are only for suits: they can be equally appealing to degens, whether looking to trade a selection of DeFi tokens or a basket of memecoins. Because that’s the beauty of indexes: there are no limits on the types of assets that can be bracketed together and traded as one. In the future, it may be possible to trade an index composed of DePIN tokens, or of Trump memecoins, or of Solana blue chips.
What’s exciting about the rise of crypto indexes isn’t so much what can be done with them today, but the additional use cases they have the potential to unlock if they can demonstrate resilience and genuine demand from retail users. It’s only a short step from trading onchain indexes to being able to long or short them, add leverage, or to trade entire crypto ecosystems such as Ethereum v Solana, flipping your thesis from bullish to bearish in one click. Whatever the future may hold for crypto indexes, don’t fade them. They’re a powerful tool for tracking specific markets and might just be the next meta in the making.
