Equal Weighting

Equal Weighting is an indexing strategy where every constituent asset is assigned the same weight, regardless of its market capitalization or trading volume. This means that a small-cap token has the same impact on the index performance as a large-cap token.

This method prevents a few dominant assets from skewing the index results, offering a more balanced exposure across the entire basket. It is often used in crypto-indices to provide broader market participation and to capture growth from smaller, emerging projects.

However, it requires frequent rebalancing to maintain equal proportions as asset prices fluctuate. This rebalancing activity can incur significant transaction costs and slippage in less liquid markets.