Hi all
I posted this question on telegram group, but got no reply, so I will try here as well.
I thought about that paradox in regards to the index, your thoughts are highly appreciated:
Index goes up, it gets more attractive to investors and they start to buy-in. Since the index is within the same domain as the entities it tracks, it will may have a direct affect. Once certain coin gets dominant, ppl usually sell their other holdings in order to buy. I saw it happens with etc and monero in the last few months. When it happens all other coins move to red.
Since that one actually track those coins, it will have a direct impact on the index itself.
Is this something that can actually happen and act as sort of a mutual negative feedback (like a self balancing)?
If ICNX started to pump and its' underlying assets were dumping, then arbitrage traders would be selling ICNX and buying the underlying assets, in order to bring the prices back into equilibrium.
The opposite would also happen. If a coin in the index, like Lisk, pumps up 20x in 2017, then arbitrage traders would be selling Lisk and buying ICNX, until the prices back to equilibrium.
Why do you assume that traders will sell when index or coin is pumped AND be buying other asset from within the index with 100% of the profits made? They may just keep the profits and decide to re-buy just 10% of them
The market will reach equilibrium. Here's an example:
- Say ICNX is holding cryptos with a total net-asset-value of 5000 BTC and ICNX market cap is at exactly 5000 BTC - that's equilibrium
- Lisk price pumps massively, and now ICNX is holding cryptos with a total net-asset-value of 7000 BTC
- The market recognizes that ICNX market cap of 5000 BTC is now under-valued compared to the 7000 BTC worth of cryptos it holds
- The market now buys up ICNX until market cap is brought up to 7000 BTC - back to equilibrium
(some of the money for this ICNX buying would be coming from people selling Lisk to take profits too, so equilibrium may be reached somewhere below 7000 BTC)
You were asking, what happens if people pump the price of ICNX up above net-asset-value. In that case the market would buy the underlying assets and/or sell ICNX until the prices reach equilibrium again.
and hey few coins are still coins lol how do i claim them when i didn't create an ICONOMI ICO account.
I hope fine 
Haha, just kidding.