How a New Index Token Aims to Profit from ETH’s Price Momentum

Ethereum, the second-largest cryptocurrency by market capitalization, has been on a bullish run in the past few months, reaching new all-time highs and attracting more investors and developers to its ecosystem. But how can one take advantage of ETH’s price momentum without the need for constant market monitoring and manual trading? This is where a new index token, powered by CoinDesk Indices and Index Coop, comes in.

The Index Coop CoinDesk ETH Trend Index (cdETI) is an automated strategy token that uses CoinDesk Indices’ Ether Trend Indicator (ETI) to allocate between ETH and USDC, a stablecoin pegged to the US dollar. The ETI is a daily snapshot of Ethereum’s price momentum, based on the comparison of short-term and long-term price averages. The ETI uses price data from the past 180 days to calculate these averages, and then breaks down this analysis into four pairs of short-term and long-term averages, comparing them to identify the price trend.

How a New Index Token Aims to Profit from ETH’s Price Momentum
How a New Index Token Aims to Profit from ETH’s Price Momentum

Based on the ETI value, cdETI adjusts its exposure to ETH and USDC accordingly. When the indicator shows a significant uptrend, cdETI is allocated 100% to ETH. When there is a significant downtrend, cdETI is allocated to 100% USDC. If there is no significant trend, the product will be allocated equally to USDC and ETH. This way, cdETI aims to capitalize on ETH’s price momentum, while reducing the downside risk and volatility.

Why is cdETI a promising product for ETH investors?

cdETI is the first on-chain product that leverages the ETI, which is a proprietary index developed by CoinDesk Indices, a leading provider of crypto market data and insights. CoinDesk Indices has a team of experts and analysts who monitor and maintain the ETI, ensuring its accuracy and reliability. Andy Baehr, CFA and Managing Director at CoinDesk Indices, said: “We built ETI to drive ETH strategies that help deliver a smoother ride. We are excited to collaborate with Index Coop for cdETI, the first on-chain ETI-driven product.”

Index Coop is a decentralized autonomous organization (DAO) that creates and maintains crypto index products, such as the DeFi Pulse Index (DPI) and the Metaverse Index (MVI). Index Coop has a community of over 10,000 members who contribute to the product development, governance, marketing, and distribution of the index tokens. Index Coop is responsible for maintaining the cdETI token and ensuring its alignment with the ETI.

cdETI is a very high risk product unsuitable for many crypto users. Past performance is no guarantee of future returns. The performance of cdETI is dependent on CoinDesk’s ETH Trend Indicator, cdETI’s methodology and tracking and various other factors. Please seek professional advice before buying cdETI. cdETI may deliver zero or negative returns compared to holding ETH or stablecoins.

How can one buy and sell cdETI?

cdETI is available on the Index Coop website, where users can buy and sell the token using their preferred wallet, such as MetaMask, WalletConnect, or Coinbase Wallet. Users can also track the performance, composition, and methodology of cdETI on the website, as well as access the latest news and updates from CoinDesk Indices and Index Coop.

cdETI is also listed on Uniswap, a decentralized exchange that allows users to swap any ERC-20 tokens without intermediaries or fees. Users can find the cdETI/ETH pair on Uniswap and trade it with other users in a peer-to-peer manner. Users should be aware of the risks and costs associated with trading on Uniswap, such as slippage, liquidity, and gas fees.

What are the benefits and challenges of cdETI?

cdETI offers several benefits for ETH investors who want to take advantage of ETH’s price momentum, such as:

  • Simplicity: cdETI is a single token that automates the allocation between ETH and USDC based on the ETI, eliminating the need for manual trading and market monitoring.
  • Transparency: cdETI is powered by CoinDesk Indices, a reputable and trusted source of crypto market data and insights. The ETI and cdETI methodologies are publicly available and verifiable.
  • Accessibility: cdETI is an on-chain product that can be bought and sold on the Index Coop website or on Uniswap, using any ERC-20 compatible wallet. Users do not need to register or provide any personal information to access cdETI.
  • Backtest performance: According to the Index Coop website, backtest data shows cdETI potentially outperforming ETH over the last two years, delivering higher returns with lower volatility and drawdowns.

However, cdETI also faces some challenges and limitations, such as:

  • High risk: cdETI is a very high risk product that may deliver zero or negative returns compared to holding ETH or stablecoins. cdETI is subject to various factors that may affect its performance, such as the accuracy and reliability of the ETI, the rebalancing frequency and costs, the market conditions and liquidity, and the regulatory and legal uncertainties.
  • New product: cdETI is a new product that was launched on December 15, 2023. It has not been tested in the real market for a long period of time, and it may encounter technical issues or bugs that could affect its functionality and security.
  • Competition: cdETI is not the only product that offers exposure to ETH’s price momentum. There are other products that use different strategies and indicators, such as the ETH Flexible Leverage Index (ETH2x-FLI) from Index Coop, which targets a long 2x exposure to ETH using a collateralized debt position. Users may prefer other products that suit their risk appetite and preferences better.

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