Index price is used as a benchmark to determine the value of the cryptocurrency market as a whole or a specific sector within it. The index price provides a broader perspective on the market's performance and helps traders and investors track trends and make informed decisions.
Index prices are typically calculated using various methodologies. The most common approach is a weighted average of the prices of constituent cryptocurrencies. The weight assigned to each cryptocurrency in the calculation can be based on factors such as market capitalization, trading volume, or other predetermined criteria.
Index Price is calculated as:
If last price from more than 3 constituents are valid
Step 1: Cap a last price of each constituent exchange at 30bp median price, in other words,
Price'(i, t) = Min(Max(Median(t) - 30bp, Price(i,t)), Median(t) + 30bp)
- Price(i, t) = the last price of an exchange i at time t
- Median(t) = the median of the last prices from constituent exchanges
Step 2: The index is calculated as equal-weighted average of Price'(i,t) 's.
If last prices from two constituents are valid, the index price is simply an average of last prices from those two constituents. Finally, if a last price from only one constituent is valid, we serve this last price as an index price.
Exception Handling
Following rules are applied to protect indices from poor connections to constituent exchanges.
- If market data received from an exchange is deemed to be significantly delayed (more than 500 ms), Flipster excludes this market data from index calculation.
- If the exchange has not updated market data within one minute, Flipster serves the last price for this exchange as the most recent valid last price.
- If an exchange is under maintenance, or if market data has not updated market data within one minute, Flipster excludes this exchange from index calculation.
- For an excluded exchange to be re-included into index calculation, two conditions below should be satisfied.
- Market data feed is not deemed to be significantly delayed (more than 500 ms)
- A received last price is a valid number, and should be bounded within 30bp bandwidth of the median price based on constituents other than the excluded exchanges
- If market data feed from an excluded exchange does not fulfill such two conditions, this exchange is not re-included.
- If the calculated index price varies by more than 25% from previous index price, Flipster regards this situation as anomalous. Therefore, Flipster would stop index calculations pending investigation.