Coinbase to launch own Cryptocurrency Index Fund
March 8, 2018 6:02 am,
The Bitcoin exchange Coinbase is all set for launching a weighted index fund for cryptocurrencies. Much like how the Dow Jones Industrial Average gives a sense of the American economy, this fund tries to reflect major trends in the cryptocurrency market.
This firm from the US which is the largest cryptocurrency company in the world and most recently valued at $1.6 billion, has formed a subsidiary called Coinbase Asset Management to oversee the new Coinbase Index Fund, as said by their product lead Reuben Bramanathan.
The company published the announcement on its blog: We’re excited to announce Coinbase Index Fund. Coinbase Index Fund will give investors exposure to all digital assets listed on Coinbase’s exchange, GDAX, weighted by market capitalization. If a new asset is listed on the exchange, it will be automatically added to the fund. Index funds have changed the way that many people think about investing. By providing diversified exposure to a broad range of assets, index funds enable investors to track the performance of an entire asset class, rather than having to select individual assets. We’re excited to give our customers the ability to invest in the potential of blockchain-based digital assets as a whole.
This project will have a $10,000 minimum and charge a 2 percent annual management fee with no performance fee, which is rare for most traditional investment funds, but luckily is becoming the norm for crypto-specific passive investment vehicles.
This Index Fund is the first investment vehicle from Coinbase’s new asset management division. It will include all digital currencies that trade on GDAX, weighted by market cap. This means at launch it will be comprised of 62 percent Bitcoin, 27 percent Ethereum, 7 percent Bitcoin Cash and 4 percent Litecoin. This will rebalance whenever a new asset is added to GDAX as well as once a year to account for supply changes (as different currencies have different inflation targets).
Just like how the Dow Jones Industrial Average is a basket of 30 stocks meant to give a sense of the American economy, this index fund will try to reflect major trends in the cryptocurrency market.
Considering what Coinbase is, the leading U.S. marketplace for buying major cryptocurrencies. Its GDAX exchange for professional traders offers Bitcoin, Bitcoin cash, Litecoin, and Ethereum. It does not currently offer Ripple or XRP.
In addition, Coinbase does plan to offer future investment vehicles that aren’t limited to what is listed on GDAX but for now, it’s the best way to insure that there is sufficient liquidity to acquire the initial assets.
Quoting Coinbase President and COO Asiff Hirji, “It’s an easy way to get exposure to the crypto assets that we offer on our exchange. The company has been cautious when adding new currencies to the exchange, and is working to avoid any “rubbish out there”.”
Read more about it here: https://www.ft.com/content/6d9a35be-2167-11e8-9efc-0cd3483b8b80