Index Fund

An index fund is an investment product that tracks the performance of a specific market index by holding a basket of assets in the same proportions as the index. In crypto, index funds and index tokens allow investors to gain diversified exposure to the broader cryptocurrency market or specific sectors (like DeFi or Layer 1 protocols) without having to buy and manage each asset individually. Crypto index funds can be centralized (managed by a fund company) or decentralized (managed by smart contracts).