Should you invest in the CMC100?

These days a lot of people seem to be chasing quick cash grabs through memecoins trading. It's sincerely the most insane thing to witness given the nature of these tokens.

If you visit Pump.fun, I can guarantee that you'll be able to witness, in real time, several memecoins launch and rug within 30-60mins, yet, for some reason, people are still throwing money at it. There are even a couple of reports on launch-rings that basically create thousands of memecoins only to rug for little-sized gains every single month(day?).

Of course, since they do this with thousands of tokens, the ROI can no longer be considered little.

Yet, again, people still throw money at it. One could argue that retardation, as embraced by the community to be something they identify with, is the most fitting description of the state of every participant out there.

But enough about memecoins, what's CMC100?

CoinMarketCap 100 index

CMC 100 (Crypto Market Cap 100 Index) is a cryptocurrency market index created by CoinMarketCap, designed to track the performance of the top 100 cryptocurrencies by market capitalization (excluding stablecoins). It serves as a benchmark for the overall crypto market, similar to how the S&P 500 reflects the U.S. equity market. — GPT

The CMC100 represents roughly 87% of the crypto market cap and is dominated by the top 10 coins, which make up over 90% of its weight.

Of course, these values can change over time as they are based on market capitalization which changes every second. That said, what's interesting about the CMC100 is that it's a unique way to approach crypto investment in an industry increasingly becoming saturated and filled with a lot of noise and scams.

Given that the primary weighting of the index is market capitalization, rebalances are required monthly to adjust to market conditions.

Generally, as an investor or trader, that would imply selling a loser token for a new winner to ensure that your investment remains in the top 100 crypto assets in market capitalization, excluding stablecoins and asset-backed wrapper tokens such as WBTC and stETH. Note that this all has to be done manually following the index as it is not, in itself, a tradable asset.

As of the time of writing, the CMC100 has grown by an impressive 61.47% in the last 365 days. This is better performance than popular traditional indexes such as S&P 500, 100, Nifty 100, Nasdaq-100 and FTSE 100.

So that would make it a good investment, yeah?

As seen in the chart above, Bitcoin makes up 67.10% of the index, which means that it accounts for approximately 41.24% of the gains highlighted above and as a result, significant price movements in Bitcoin have a huge impact on the profitability of your investment. When coupled with the fact that generally, BTC crashes often lead to broader markets bleeding, the CMC100 proves a significant risk investment, still.

That said, it is worth saying that it remains impressive that even without Bitcoin, 99 assets in the index would still enable investors to yield better ROI than investing in mutual funds tracking traditional indexes.

Nonetheless, I think that since this isn't something you put money in and never have to look at again, the monthly rebalances are a very crucial process as it contributes significantly to how well the overall investment performs. Also, it would also help if the top 10 assets did not have such significant marketcap dominance over other tokens in the index as that makes price movements in most other assets negligible and at the same time, major price movements within the top 10 can significantly hurt the overall investment.

Until the cryptocurrency markets reach certain levels of maturity such as being more revenue and ecosystem growth driven, and not having memecoins dominate billions in market valuations and volumes, approaching the CMC100 should be a cautious undertaking.

Posted Using INLEO