The term cryptocurrency index fund is a new buzz word in the crypto stocks financial sector and is attracting a lot of attention. Cryptocurrency index funds are a type of investment that represents an easy entrance into the cryptocurrency world. Its users avoid managing their portfolio for cryptocurrency coins. They also enable you to spread risk over the different selection of coins thus protecting themselves against the volatility of the crypto stocks market.
Come with me as we explain what a cryptocurrency index fund is and also give you a list of some of the best cryptocurrency index funds in 2020.
If you have worked with regular index funds before, you will realize that it doesn’t differ that much from a cryptocurrency index fund.
Essentially, you buy into a fund and this fund is usually entailed of several cryptocurrencies. That way you are buying into a host of cryptocurrencies as opposed to investing directly in a particular coin. The fund then goes ahead to invest your money across the many cryptocurrencies that they are following.
There are two major ways to build indices;
- Price weighing – high priced assets move the index more than low priced assets.
- Capitalization – assets with the largest market cap impact the index the most.
The value of your investment is what trades this selection of coins thus incurring better payoffs and reducing the risk involved which each cryptocurrency. Entering a fund saves you the hustle of opening crypto wallets and tracking coin prices as all that is done by the fund manager at a small fee. This fee varies from one fund to another, however, a higher fee doesn’t always necessarily mean a better-managed fund. That is the reason why you must conduct your research beforehand.
And it is in that same spirit of research that we decided to present you with some of the best cryptocurrency index funds to look into in 2020.
Coinbase initially started as a crypto stock exchange platform and then grew in popularity and acceptability because it is very user-friendly and trustworthy. Recently, they started to offer an index fund to capitalize on their huge user base and popularity. It offers index funds on Basic Attention Token (BAT), Ox, Ethereum Classic, Litecoin, Bitcoin Cash, Ethereum, and Bitcoin. With BAT with the most recent addition to the list.
For anyone that has been following the cryptocurrency happenings, you know that Bitcoin is the most popular cryptocurrency. It, therefore, comes as no surprise that Bitcoin takes a majority of the funds, taking about 75% while Ethereum takes about 15%, Bitcoin Cash comes third at 6%, and Litecoin comes fourth at 2%; Ethereum classic, Ox and BAT share the remaining 1% of the funds.
Their selection of cryptocurrencies may seem limited because the platform focuses on coins with large market capitalization which are usually much less volatile than the smaller market cap coins.
Crypto fund charges a very low management fee as compared to most of its counterparts. The fee is currently at 0.99%, and the reason behind this low fee is that the platform tracks the cryptocurrencies index 30 which is an index that has already been carefully thought out to give traders an objective picture of the crypto-market. It keeps track of the top thirty performing currencies by adjusted market cap. That alone makes the crypto fund a great option for those who are looking to dive deep into the data around cryptocurrencies.
A host of statistics is availed at your disposal; does it get better than that? The wide range of coins being tracked by this platform means that your investment is split over a wide portfolio. This protects from volatility and increases your chances of making a fat profit.
Bitwise happens to be one of the leading providers of crypto index funds pioneered in the crypto asset management space.
It created its very own cryptocurrency index funds called ‘Bitwise 10 private index fund’. That index offers a well-diversified exposure of 10 cryptocurrencies weighted by 5-year diluted market capitalization. Also, the rebalancing of the fund happens every month.
Bitwise mostly targets seasoned investors and traders because the minimum investment required is $25,000 at an annual management fee of around 3%. Bitwise has a great focus on security and privacy. All of the coins are securely stored in air-gapped cold storage with multi-sig technology. To facilitate the investors, they can also do automate tax preparation where every investor gets a schedule K-1 so that the complexities of the filing can be reduced.
Bitwise has a solid team with a range of intentioned investors who have a diverse background.
Note that Bitwise only allows US citizens to invest, thus locking out any investors of other nationalities. If you are not a US citizen just keep scrolling the list doesn’t end here. locking out investors of other nationalities.
This platform provides tools that allow both beginners and expert traders to invest in crypto stocks. Iconomi is a platform dedicated to index funds and is a great option for anyone looking to diversity their digital assets. It offers simple user-friendly investment options that are ideal for a beginner who is still not sure what to invest in.
It offers a wide range of index funds. Some of which have very interesting criteria such as:
- Delta Summit Index (DSI) – an index that includes digital currencies based on a vote taken amongst the attendees of the Delta Summit, a leading Blockchain event.
- The solid Prime Index (SOPR) – holds 23 different cryptocurrencies protecting users against huge losses if one currency’s value collapses and also enabling users to capture lesser-known altcoins that rocket in price suddenly.
Iconomi offers a huge selection of index funds, therefore they offer something for everyone. Interestingly, the best performing funds on Iconomi are the more conservative ones. It focuses on the least volatile assets in the hope that this lack of volatility demonstrates lasting value.
Currently, it is managing an amount approaching a quarter of a million dollars.
Bit20 is one of the first cryptocurrency index funds ever launched and it is in the form of a Contract for Different (CFD). It consists of 20 cryptocurrencies by market cap, this essentially means that the fund invests in the top 20 cryptocurrencies every month. Being that it is one of the oldest cryptocurrency funds, it is a pretty stable form of investment.
- BB index
- Crypto Index
- Ember fund
Cryptocurrency index funds are a great option for anyone looking to invest in cryptocurrency. All the above platforms possess different outstanding qualities but one thing they all have in common is that they reduce volatility and lower risk as compared to direct investments in crypto coins.
Be sure to consult with an expert before investing because no investment is 100% safe from risk.
Cover image source: https://investorjunkie.com/
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