Crypto glossary
Index price
The index price is a weighted average of an asset's spot price on several exchanges, used to anchor perpetuals, settle futures and calculate funding.
A derivatives exchange cannot rely on its own market to know what an asset is really worth, so it builds an index from spot prices on a basket of large venues. Each source is weighted, often by volume, and outliers or venues that stop responding are filtered out. The result is updated every second or so and published alongside the contract.
The index price feeds several mechanisms. Funding rates on perpetual futures are calculated from the gap between the contract price and the index, the mark price used for liquidations is derived from it, and dated futures and options are usually cash-settled against an average of the index over the final minutes before expiry. Decentralized perp exchanges obtain the equivalent figure from oracles.
An index is only as robust as its sources. If one constituent exchange has a glitch or a thin market is manipulated, the index can be skewed, which is why exchanges cap each venue's weight. Different platforms use different baskets, so their index prices may differ slightly at any moment.
Example
An exchange's BTC index combines spot prices from Coinbase, Kraken, Bitstamp, Binance and OKX; when one feed freezes during an outage, it is dropped and the index keeps updating from the other four.