Laspeyres index in a cryptocurrency portfolio: how to track price dynamics

Why Investors Need the Laspeyres Index

Traders often wonder: how can I tell if the value of my portfolio is actually increasing or if it's just market fluctuations? The answer lies in a tool that economists have used for decades — the Laspeyres index. This method allows you to fix a specific set of assets and track how their prices change without distortions caused by changes in the portfolio structure.

How the Laspeyres Index Works

The essence is simple: you take a basket of goods ( or in our case — cryptocurrencies ) at an initial point in time, fix the quantity of each asset and its price. Then, after some time, you only update the prices, keeping the previous quantity. This approach gives a clear picture of inflation or deflation without the influence of structural shifts.

Mathematical foundation

Calculation formula: Index = ∑(Pt × Q0) / ∑(P0 × Q0) × 100, where:

• Pt — current price of the asset
• P0 — price in the base period
• Q0 — quantity in the base period

The result is interpreted as:

• Above 100 — the portfolio has appreciated
• Below 100 — the portfolio has decreased in value
• Equal to 100 — the price has not changed

Practical Example for the Cryptocurrency Market

Imagine a portfolio of three assets on December 21, 2025. Initial positions (base period):

• 0.5 BTC at $80,000
• 10 ETH at $2,500
• 100 SOL at $100

Total cost of the basic basket: (0.5 × 80,000) + (10 × 2,500) + (100 × 100) = 40,000 + 25,000 + 10,000 = $75,000

Current prices (current data):

• BTC: $88,130
• ETH: $2,970
• SOL: $124.90

Current value of the same basket: (0.5 × 88.130) + (10 × 2.970) + (100 × 124.90) = 44.065 + 29.700 + 12.490 = $86,255

Laspeyres Index = (86.255 / 75.000) × 100 = 114.9

This means that the weighted average cost of your portfolio has increased by 14.9% since its formation.

Application in Cryptocurrency Portfolio Management

For a diversified portfolio, the Laspeyres index becomes an indispensable tool. Instead of tracking each position separately, you see the overall dynamics. This is especially useful when allocating capital among multiple cryptocurrencies, as it shows the real change in the total value of assets.

Advantages of this approach:

• Eliminates the impact of reallocating funds between assets on the overall result
• Allows comparing the portfolio over different periods of time on an objective basis
• Helps assess the inflationary pressure on the portfolio as a whole

When the Laspeyres index provides the most useful information

The method works best in long-term portfolios where the composition of assets is relatively stable. For short-term speculators who often rebalance positions, traditional performance metrics may be more informative.

The Laspeyres index focuses on price changes rather than the trading decisions of the investor, making it an objective indicator of market dynamics as a whole.

Conclusion

The Laspeyres index is a time-tested tool for analyzing portfolio changes. It has proven useful in macroeconomics and is applicable in the cryptocurrency market as well. By fixing the quantity of assets and only tracking price fluctuations, investors gain a clear understanding of how the value of their positions increases or decreases regardless of structural manipulations within the portfolio.