Metaverse Index - December Rebalance

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Objective of the Metaverse Index (MVI):

MVI is designed to capture the trend of entertainment, social activity and business moving to take place in virtual economies, powered by NFTs and blockchain technology. MVI uses a combination of the square root of market cap and liquidity weighting to arrive at the final index weights.

MVI Rebalance Weights:

Weights were calculated as of December 31st 2021:

|524x410.99999999999994
|524x410.99999999999994759×596 24.1 KB

Here’s the change in allocations with “current” allocation taken at the time of writing.

|454x389.9999999999999
|454x389.9999999999999629×541 20.9 KB

Rebalance summary:

We continued to use spot liquidity and spot market caps at the of the month to calculate the weights.

Per discussions with the Engineering and Product Working Group (@dylan, @Cavalier_Eth, @overanalyser), the rebalancing process will be kicked off in the week starting Monday, January 10.

This month we have one new addition, the Rally token (RLY). Rally is a platform that allows anyone to create a social token, even without prior experience using crypto. As a platform, it fits neatly into our recently announced definitions of Metaverse token categories. When considering the composition of MVI, we felt that including individual brand / community / personal tokens doesn’t fit MVI’s mandate and will become more difficult as they proliferate in future. However, social tokens do allow anyone to form a digital bank account around their reputation and build a community from scratch. This is a textbook definition of life moving to digital environments powered by blockchain and NFTs. Having Rally as a ‘social token aggregator’ of sorts, allows MVI to capture this segment without the challenge of choosing between the thousands of social tokens themselves.

We are continuously assessing tokens for both inclusion and exclusion, based on market caps, liquidity and, more recently, categories as we want MVI to capture the broader Metaverse narrative, not just the gaming part of it.

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Hi verto, HNY and congrats on the continued success of MVI. One question regarding the liquidity figure. Wouldn’t it be less expensive to use a slippage-related metric like trading depth instead of the absolute $$ liquidity amount? The latter doesn’t take into account if the liquidity is concentrated, within range, split across dex’s (unless it’s from the most liquid dex), etc. That might also help flatten the liquidity allocation since I suspect some of the smaller pools are more concentrated. What do you think? JK

Cc @overanalyser

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Yeah, we ran this experiment a couple of times and found that there wasn’t much difference between execution based vs liquidity based and where there were differences, they actually were not in our favour. So I don’t see that as a solution.

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I think in the realm of these type of token, choosing a leader/pioneer is a viable option as many of these categories will experience expansive proliferation in the coming years. There’s always a certain level of trust among investors in options that have a history and by the time this proliferation does occur, RLY will have that established history. I think this is a good option to achieve that diversification of the metaverse narrative as well as addressing the “usability” and “network effect” of beginners in the space of RLY’s target market which in my opinion are some of the top traits when investing in projects. Great addition team!

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We wanted to provide an update on the rebalance.

As mentioned in the original message, we were initially informed that the rebalance would be done during the week of the 10th.

Given the market action, we saw deterioration of liquidity and weights moving further away from target. The latter is driven by the fact that weights were calculated using data from December 31st as per the methodology. As a rule of thumb, the greater the period between the calculation date and the actual rebalancing, the higher the risk that the market will move against us which leads to higher cost of rebalancing.

We believe that a combination of factors contributed to the rebalance being delayed, including difficulty with scheduling around the holidays, DG migration taking longer than expected by engineering and the high gas prices during the week of the 10th. The rebalance was kicked off on Friday evening (EU time) on Jan 14th with the majority of the rebalance occurring during the weekend. At the time of writing, the rebalance is not complete, with some Rally and Rarible trades still remaining.

Also on Friday, we suggested that we recalculate the weights given the amount of time that has elapsed since weights were determined (over 2 weeks). We also suggested that we skip the next rebalance as it would have to happen in 2.5 weeks. We have received no engagement on these suggestions.

At this time, we are waiting for the rebalance to be completed and will proceed with next month’s rebalance per usual.

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