Although I like the idea, "weighted by market cap" is a bad measure.

I'm not sure though what would be a good way to select them. Also, small market cap coins tend to grow faster than coins with a large market cap. I can imagine different funds, some with small cap coins, some with large coins.

Of course, this year altcoins showed crazy increases, many went up 10,000% in a few months. If you have a fund that invests in 50 different coins, a few of those would lead to a very nice ROI. Especially at this point an index fund can safe you a lot of work, as it's an impossible task to safely invest in that many different coins on your own, and keep them in wallets under your control.

I would invest in a crypto index fund, if it's created by an established institution, not a random ICO where an anonymous person wants to be trusted with hundreds of millions of dollars.