Coinbase announced the release of a new cryptocurrency index fund for US accredited investors. In the United States, to be considered an accredited investor, you would need a net worth of at least $1 million, excluding the value of your primary residence, or an income of at least $200,000 each year for the last two years, or a combined income of $300,000 for married couples. There were 12.41 million accredited investors in 2013, according to this definition.
Qualified US investors will have access to a basket of digital assets, including all assets listed on GDAX, including Bitcoin, Litecoin, Ethereum, and Bitcoin Cash, weighted by market capitalization. The minimum investment is $10,000 in value, and may be made in USD, BTC, ETH, BCH or LTC. According to the Coinbase website, there is a 2% annual management fee, but no performance fee.
The current allocation by market cap is 62% Bitcoin, 27% Ethereum, 7% Bitcoin Cash and 4% Litecoin, rebalanced annually on January 1st and adjusted to remove the effect of supply increases. If at some point in the future, new assets are listed on the exchange, they will automatically be added to the fund.
According to Coinbase, index funds have changed people’s perception of investing. The diversified portfolio of digital assets in this fund give investors the ability to track the performance of cryptocurrency as an asset class, rather than focusing on an individual asset such as Bitcoin.
According to the announcement, Coinbase is planning to launch more funds that include a broader range of cryptocurrencies.
In addition to the fund, the company has introduced Coinbase Index at a value of $4,935.93. The index tracks the overall performance of the cryptocurrencies listed on GDAX, weighted by market capitalization. Assets listed on the exchange must meet a number of criteria, which are different than the criteria set for other exchanges.
There is a debate surrounding the current definition of an accredited investor in the United States. The qualifying factors suggest that individuals who do not have either the income or the net worth required are somehow less sophisticated than their wealthier counterparts. One could argue that an investor who has inherited their wealth could be far less sophisticated than a potential investor who has an education in finance, but does not yet meet the criteria as defined. A more free market would be one that does not restrict people’s ability to invest by law based on income or other factors, but instead just focuses on transparency. Regardless, Coinbase did not make the rules; they are only abiding by them.
The cryptocurrency landscape has changed enormously over the past year. Bitcoin futures were released on the CME and CBOE in December. Bittrex and other exchanges are looking to enable fiat deposits. And the SEC and CFTC have indicated that while they do plan to further regulate the cryptocurrency market, they do not want to stifle innovation. The Coinbase Index Fund is the first financial product of its kind, but it will not be the last. While other exchanges offer broader selections of digital assets, sometimes including as many as 200 different choices for customers, the Coinbase strategy appears to be centered on providing greater flexibility in how customers choose to invest in the most heavily traded coins.
Read the announcement on the Coinbase blog here.
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