Metaverse Index - January 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 January 31st 2022:
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Here’s the change in allocations with “current” allocation taken at the time of writing.

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Rebalance summary:

We continued to use spot liquidity and spot market caps at the of the month to calculate the weights. There are a couple of problematic tokens, when it comes to liquidity. Specifically, liquidity for RARI and REVV has been consistently poor with no signs of improvement. Ideally, we would prefer to exit these positions, however, that is not currently feasible. With that in mind, we decided to to take a slightly different approach to rebalancing them. Essentially, when a rebalance necessitates a sale of these tokens (so target weight is below the current weight) we will proceed as usual, selling down the position. However, when a rebalance necessitates a purchase of these tokens, their weight will be frozen with excess weight re-distributed to other tokens on a weighted basis.

Other than that, there are no changes, and no additions or removals.

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I like the approach to problematic tokens without enough liquidity. If I understand it correctly, the idea is to avoid worsening the situation by not buying them anymore, since they show no signs of improvement. At the same time, when you have the opportunity to do so, you sell the amount of the problematic token that you can. I realize that the decision not to exit in one go is dictated by the lack of enough trading volume to do so, but still I believe the gradual method that circumstances force you to have is good, since things can always change.

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Yup, you got it right. Also, when we add new tokens to the index, it will automatically reduce the target weights of the problematic tokens. And if the opportunity presents itself, whether through a rally in one of these tokens, added liquidity or v3 liquidity coming into range, or perhaps improvements to the rebalancing infrastructure, we take that opportunity to exit.

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