Popular Bitcoin exchange Coinbase has entered into the asset management sector through its Crypto Index Fund that covers Bitcoin, Ethereum, Bitcoin Cash and Litecoin. This Index Fund only allows the US accredited investors and is already undergoing the process of developing funds focusing on retail traders.
The Coinbase/GDAX index fund…
One of the most popular cryptocurrency exchange, Coinbase has brought a good news through its crypto index fund. Now, this US-based crypto exchange will let you buy the bitcoin among three other top cryptocurrencies through a new fund instead of trading those cryptocurrencies directly on the exchange.
With the valuation of about $1.6 billion, the exchange has now entered the asset management business to become a bigger and much broader financial services company.
The passively managed crypto index fund would be investing on those digital currencies that are traded on the Coinbase along with GDAX, its institutional exchange. These cryptocurrencies include Bitcoin, Bitcoin Cash, Ethereum, and Litecoin.
Key features of the crypto index fund
The cryptocurrency index fund of Coinbase will have a minimum of $10,000 fund along with an annual management fee of 2 percent. However, there will be no performance fee need to be paid here which can rarely be seen in the traditional investment funds. This no performance fee is becoming a standard rule in the crypto market for passive investment instrument.
The first investment vehicle from the new asset management division of Coinbase, the Index Fund weights the included cryptocurrencies by their market cap. The resulting weight comprises of the highest 62 percent of Bitcoin, 27 percent Ethereum, 7 percent Bitcoin Cash and the remaining 4 percent Litecoin.
The weight would be rebalanced once a year for the changes in supply as different currencies have different targets of inflation, and whenever GDAX adds a new asset.
A great opportunity for beginners…
The Index Fund basically allows you to diversify your profit or loss by investing in a combination of cryptocurrencies instead of a particular one.
The product manager at Coinbase, Reuben Bramanathan stated:
“We are noticing people coming to space for the first time, being excited about cryptocurrencies, but not knowing where to start, so we’re excited to give people the ability to get broad exposure to the entire asset class rather than having to select individual investments. We’re seeing strong demand from institutional and high-net-worth individuals.”
However, a big point of concern here is that it will only be open to the US accredited investors or those individuals having the net worth of about $1 million or annual income of $200,000. Though Coinbase has stated that it might launch a similar fund that will cater to all the investors irrespective of their wealth. This would be similarly structured to the ETF i.e. exchange-traded fund that is pending for the approval from regulators.
He stated that:
“When people think about a retail index fund, they’re talking about an ETF, and that’s obviously a long process to launch. Our objective here is to get to a position where we do launch a fund that’s available to retail, but given the regulatory hurdles, we wanted to offer something to institutional and accredited, to begin with.”
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