Coinbase is one of the most popular cryptocurrency wallets on the planet. There is no doubt about that. If you haven’t already, take a look at the complete review about Coinbase for all the details on them. This post is not about Coinbase themselves or the Ewallet they offer. This is about something else. Something new…..
When you are as big of a player as Coinbase is in an industry as quickly growing as cryptocurrency, you usually have one of a couple options:
Option A: Would be to “stay in your lane” so to speak and then simply allow newer companies to pop up and solve the industry’s current issues or problems.
Option B: Is to simply offer as many products, packages and services as you need to and then consequently own the entire customer experience and options from A-Z.
(Sorry, no Amazon pun intended there)
Coinbase has made their decision as far as which route they choose to go with and they are sticking to it. The current cryptocurrency king just announced they are effectively adding in yet another additional service by launching a passively managed cryptocurrency index fund.
A BASKET OF DIGITAL ASSETS
All assets listed on Coinbase, weighted by market capitalization.*
NO PERFORMANCE FEE
2% annual management fee. No additional performance fee.
SECURED BY COINBASE
Assets protected by Coinbase’s industry-leading security standards.
According to the companies’ website, there will be a rather hefty (and somewhat out of reach) $250,000 minimum investment total. They will also charge a two percent annual management fee to manage said fund. There will be however no performance fee, which is rare for most traditional investment funds. Luckily this seems to be starting to be the norm for cryptocurrency-specific investment vehicles that are passive in nature.
This newly offered Index Fund is actually the first of many investment platforms from Coinbase’s new “asset management division”. This will also make us of all coins that trade on GDAX. The portfolio will then be weighted by market cap.
What does all of that mean, you may ask?
Pretty simply really…
At the time of launch, your portfolio will be comprised of:
- Bitcoin 63.39%
- Ethereum 26.68%
- Bitcoin Cash 7.25%
- Litecoin 2.67%
Your portfolio will automatically so a self rebalance whenever a new coin is added to GDAX. It will also automatically do a self rebalance once a year to account for market supply changes.
(This is because different currencies have different inflation ranges and targets).
With that being said, Coinbase will indeed offer future investment plans that aren’t limited to what is currently listed on GDAX
— but for now it’s the best way to insure that there is sufficient liquidity to acquire the initial assets.
As far as the index fund performance, although it is brand new, the fund backdates to early 2015 when GDAX was launched. Since then it’s shown (predictably) insane returns……
I’m talking about up around 49x or 4,900%.
Investments into this index fund can be made in USD. They can also be made by any of the included digital currencies. This is as long as the investor can meet the $250,000 minimum investment total.
For this paticular index fund, investors will also have to be accredited and U.S-based.
(Although Coinbase hopes to remove those restrictions for similar, future funds)
New investment can be made once a month, with redemptions happening on a quarterly basis and with no lockup period.
No need to worry about the security of the coins thems elves that you will be working with. Everything invested into this cryptocurrency index fund shall be held by Coinbase in cold storage. This is most definitely a plus. Especially considering their experience managing such high-value assets. In fact, the security for Coinbase in gheneral is so respected that they have another product called Coinbase Custody,
This service actually offers cold storage as well as custody services for other investment funds.
Now, let’s be a bit honest with ourselves. Coinbase is not the very first company to come up with the idea of a passive cryptocurrency investment fund. Some companies are now creating very similar SEC-sanctioned funds. These include projects such as Bitwise investments’ HOLD 10 index.
Others are taking a platform approach like Iconomi’s service that lets investors create their own custom-weighted crypto asset basket. But the largest difference here is that Coinbase is already such an established name in this industry with so many existing investors already using at least one of their many services.
You can take a closer look at their specifics of this offering by going to their website HERE. This Coinbase index fund is cuurently live and available for purchase. Accredited investors can sign up now. However, in my personal opinion, you would be a fool to do such a thing.
I think you would be much better off either simply using an exchange like KuCoin. In this imaginary example, you could transfer a minimum of $20-$50 worth of Bitcoin into the KuCoin exchange. With that Bitcoin, you could buy several KuCoin shares. This will give you daily payouts in almost two hundred of the top coins by market cap. This means your index fund spreads the risk AND reward over a much larger number of coins. Some of these are going to increase in value much much more (as far as growth percentage) than the four coins listed in the Coinbase index fund.
The other HUGE benefit of going this route is pretty straight forward. You don’t need a quarter millions bucks to get started! Let’s be honest, here. Not everybody has that kind of cash just laying around on any given day!
I have actually created a strategy that allows anyone to build a very large and diverse cryptocurrency portfolio and do you want to know the best part about this strategy? It requires NOTHING out of pocket! Sounds like a sales pitch that is too good to be true, doesn’t it? Yeah, I know. It really does. But it is true none the less. If you are even the least bit interested in how this strategy works, then you can read more about it HERE.
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