Benchmark has pretty much been the buzzword for a very long time. To put it into simpler terms, benchmark is a term used to describe something that acts as a point of reference, mostly referring to numbers.
What is a benchmark?
The term “benchmark” is a common occurrence in business, especially in the financial industry. In a similar vein, the cryptocurrency landscape uses benchmarks to assess the performance of a specific asset or investment portfolio. Bonds, stocks, securities, and of course, cryptocurrencies are being put under their types of benchmark indexes. These indexes are financial tools that depict a set of data points or an individual group of market prices.
For example, the Nasdaq Crypto Index (NCI), launched in early 2021 is currently widely used as a benchmark to measure the performance of various groups of digital assets. The New York Stock Exchange Bitcoin Index (NYXBT) is one of the oldest and most popular benchmarks in the cryptocurrency market. It represents the value of one bitcoin (BTC) in U.S Dollars at a specific time daily.
Dow Jones, a household name in the stock market, has also joined the world of cryptocurrency benchmarking with the launch of three separate indexes: The S&P Bitcoin Index, the S&P Ethereum Index, and the S&P MegaCap (SPCMC). All of these cryptocurrency benchmark indexes have their unique role in the market today.
The S&P Bitcoin Index (SPBTC) was launched to keep track of the performance of Bitcoin; likewise, the S&P Ethereum Index (SPETH) is used as a benchmark for the performance of Ethereum – the second-largest cryptocurrency in terms of market capitalisation as of today. On the other hand, the S&P MegaCap index (SPCMC) is used as a benchmark to track the performance of both Ethereum and Bitcoin by market capitalisation.
Cryptocurrency investors can rest assured now that their digital assets have trustworthy and transparent benchmarks launched by reliable parties.