<p>A <strong>market index</strong> is a statistical measure that tracks the performance of a specific market or a segment of it. It's like a report card for the market, showing how well it's doing.</p>

<h2>How It Works</h2>
<p>Market indices are calculated using a mathematical formula that takes into account the prices of the securities (like stocks or cryptocurrencies) included in the index. Here's a simple breakdown:</p>
<ul>
  <li><strong>Constituents:</strong> The index includes a list of securities. For example, the S&P 500 includes 500 leading companies from various industries.</li>
  <li><strong>Weighting:</strong> Each security is given a weight based on its market capitalization (for stock indices) or free-floating supply (for crypto indices). Larger companies have more influence on the index.</li>
  <li><strong>Calculation:</strong> The index value is calculated using a formula that takes into account the prices of the constituents and their weights. The most common formula is the Laspeyres formula.</li>
</ul>
<p>For crypto indices, the calculation is similar, but the constituents are cryptocurrencies instead of stocks. Some crypto indices also adjust for the high volatility of cryptocurrencies.</p>

<h2>Why It Matters</h2>
<p>Market indices matter because they provide a quick and easy way to understand how a market is performing. Here's an example:</p>
<p><strong>Bitcoin's Dominance Index</strong> is a crypto market index that tracks Bitcoin's market capitalization as a percentage of the total crypto market capitalization. It's a useful tool for investors because it shows how Bitcoin's dominance is changing over time. For instance, if Bitcoin's dominance is increasing, it might indicate that investors are moving their funds into Bitcoin, which could signal a bullish trend. Conversely, a decreasing dominance could indicate a bearish trend.</p>