Bequant Launches Crypto-Linked Dollar Index
Posted by Colin Lambert. Last updated: August 5, 2022
Digital asset prime brokerage and exchange Bequant has launched the Bequant Dollar Index (BQDI), which measures the dollar’s strength against a basket of the eight top cryptocurrencies by market cap.
Each coin has a weighting based on its market capitalisation and volumes traded and the basket of coins is updated every month to reflect market movements. The firm says the index is crucial for investors to understand the spillover effects of the US monetary policy on the crypto universe.
By comparing the BQDI to US 10Y yields or traditional the US Dollar Index (DXY), the firm says it can already tell the investor if the current economic environment is directly linked to the crypto market. If the link is strong investors can expect new releases of economic data to add volatility to the market like in the traditional finance space. It also implies that investors can find coins that are independent of the volatility coming from the state of the economy.
Bequant says for the past two years, the evolution of cryptocurrencies was closely tied to monetary and fiscal policy in the US. Low-interest rates mean that ample liquidity conditions will flow into high-risk/high-return assets like crypto while tightening conditions mean that a risk-return portfolio has to be adjusted towards more conservative assets.
“The new Bequant Dollar Index is another tool to help our clients make more informed investment decisions,’ says Martha Reyes, head of research at Bequant. “Our research team has worked hard to quantify and capture the latest economic story into the broader crypto market. This is another way for investors to analyse the interconnectedness of the two and navigate through fundamental analysis in crypto more clearly.”