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Coinbase Index Fund
- sagivo 9y agoI don't see the value here. I can simply buy it on Gdax weighted by market capitalization and save the 2% annual management fees.
- mmanfrin 9y agoYep, and you don't have to be an accredited investor. And your money is available the moment you sell, rather than waiting for it to sell.
- dingdongding 9y agoIn future hopefully this index will become more complicated once GDAX supports more cryptocurrencies
- Dramatize 9y agoYou're not their target customer.
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- an4rchy 9y agoInteresting. The fund creates another potential source of revenue for them and at the same time, the more people that invest in it, the higher it's likely to go. Why would anyone choose to invest in a fund that is basically the same as investing in the 4 currencies they currently support directly (without fees or limitations on trading)?
- conanbatt 9y agoAutomatic and cheap balancing. Its a great business for coinbase: if it had plenty of investors, then they have a very definite measure on what to ask coin makers before putting their coin on their exchange. Figure they can ask 10% of the outstanding tokens in exchange for the legitimacy that will pump the coin sky high.
- JumpCrisscross 9y ago> Automatic and cheap balancing For someone unknown definition of “balancing.” (Rebalancing and re-weighting or re-constituting are different things.)
- Klathmon 9y agoIt's only "unknown" if you refuse to read. https://am.coinbase.com/documents/cbi-methodology.pdf https://am.coinbase.com/documents/cbi-methodology.pdf Edit: sorry, this came across more aggressive than I meant for it to be!
- deleted 9y ago[deleted]
- JumpCrisscross 9y agoPardon me, the construction is as transparent as something like this can be, i.e. generally, whatever their committee feels like. My qualm is with the word “balancing” which implies diversification as this term is used within portfolio theory. You can’t balance a book of correlated assets. (You can track them, which this index tries to do.)
- dmurray 9y agoRebalancing is the correct term of art here. The index reweights, the fund rebalances its holdings in order to track the new reweighted index. Source: traded a lot of index funds. Also, based on the blog post, the fund (or the index managers, who are the same people here) would say they are rebalancing in your sense of the word too. They are adding diversification compared to a portfolio that just holds, say, bitcoin. Sure, it's not as diverse as one that also holds stocks and bonds and real estate, but nobody's perfect.
- ram_rar 9y agoMix it up with Vanguard and I ll move all my funds from Betterment to Coinbase.
- conanbatt 9y agoWhat do you mean mix it up with vanguard?
- kridsdale1 9y agoI guess he means he wants to be invested in a mix of crypto and US Equity
- dsr_ 9y ago0.15% fee would make it sound more like Vanguard.
- s73v3r_ 9y agoPutting all your eggs in a crypto basket doesn't sound like a great idea.
- pembrook 9y agoIt's comments like these that make me think retail investors should never have been allowed to be in charge of their own retirement money.
- loeg 9y agoOy. I appreciate that the grandparent commenter expresses an idiotic and reckless sentiment, but as a reasonable retail investor myself (primarily in sane index funds like VTI and VXUS), I don't exactly want to cede control of my investments to either a private pension manager nor the government.
- myroon5 9y agoSeems dishonest to not use a linear scale on this graph: https://am.coinbase.com/index https://am.coinbase.com/index Also, the minimum investment and management fee found here don't look too appealing: Minimum Investment: $10,000 2% annual management fee https://am.coinbase.com/#invest https://am.coinbase.com/#invest
- charlesdm 9y agoYou forget it's automated. I think plenty of HNWIs are willing to pay 2% management fee to be able to invest in a diversified crypto index fund.
- sparky_ 9y agoFor fellow non-native speakers: HNWI = High Net-Worth Individual
- asdsa5325 9y ago2% fee is pretty high, I don't think so.
- jacques_chester 9y agoCryptocurrencies have characteristics of other high-risk assets -- diamond mines in war-torn regions, shares in politically unstable countries, bonds of provinces or states with a history of defaulting, venture capital, exotic commodities trading etc etc. The risk is higher, the volatility is higher, liquidity is lower, the overall market is at an early stage of development. For such asset classes, paying a fat premium is common.
- joncrane 9y agoThat 2% figure seems high. I know transaction costs in cryptocurrencies tend to be high by financial standards. Maybe that accounts for it. Also maybe by being one of the first to offer such a thing, they can charge higher management fees.
- aneesh 9y agoThat chart is log-scale. The index fell by more than half between December and February, but you wouldn't know it by glancing at the chart.
- ericmcer 9y agoGood eye, that is sketchy. The entire industry seems to be floating on FOMO right now though, so it definitely serves that purpose.
- sokoloff 9y agoIt should be labeled or otherwise shown, but I think that semi-log is the most appropriate choice of scale for long-term price change graphs like this. I can buy linear-linear for intraday charts, but anything long-term should be log-linear IMO.
- castratikron 9y ago2% fee is pretty high for an index fund.
- mhoad 9y agoAs a few others here seem to have hinted at. Although this seems to be not only an interesting idea and also a natural space for Coinbase it appears to be limited in a number of different ways. Has anyone had any other experience with other crypto style index funds such as Crypto20? If so any thoughts, advice or recommendations would be most welcome.
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- gigatexal 9y agoKudos to Coinbase for launching this but a 2% fee and the fact that Coinbase is far from being trustworthy in my book I am going to wait for when/if a company like Vanguard starts such a fund.
- enraged_camel 9y agoYeah, at 2% this is more akin to a mutual fund.
- TheCoelacanth 9y agoForget mutual funds. That's closer to a hedge fund.
- deleted 9y ago[deleted]
- pembrook 9y agoDon't hold your breath. Vanguard tends to err on the side of protecting the interests of retail investors. Hence, they don't do FOREX trading either.
- mlerner 9y agoYou should check out the Bitwise HOLD10 (where I work). We are backed by Naval Ravikant (Cofounder of AngelList and CoinList. Partner at Metastable), Avichal Garg (Part-time Partner at Y Combinator. Previously Director at Facebook), and Keith Rabois (former COO at Square: https://www.bitwiseinvestments.com/about https://www.bitwiseinvestments.com/about
- machinecontrol 9y agoCouldn't anyone just copy the composition of this fund and buy the same cryptos themselves without paying management fees or being locked in to Coinbase?
- paulgb 9y agoThe transaction costs would probably add up to more than 2% depending on how accurately you wanted to track the index, plus it sounds like a bunch of work. (Edit: I'm not saying it's actually worth 2%, which seems excessive)
- tyrust 9y agoWith a 0% maker and <=0.25% taker fee on GDAX [0], I'd be surprised if you ever came close to paying 2% of your total holdings in fees over the course of a year. [0] - https://www.gdax.com/fees/BTC-USD https://www.gdax.com/fees/BTC-USD
- JumpCrisscross 9y agoThe index they track reabalances annually [1]. [1] https://am.coinbase.com/documents/cbi-methodology.pdf https://am.coinbase.com/documents/cbi-methodology.pdf 6.10
- evrydayhustling 9y agoAnd, since those rebalances reflect only relative changes in supply, the turnover should be a small fraction of AUM.
- AndrewGaspar 9y ago"Available to US accredited investors." It seems a little ironic that any Joe Blow with a credit card can buy cryptocurrency, at presumably higher risk since he's managing the assets himself, but he can't invest in this fund.
- conanbatt 9y agoThank you SEC!
- jzwinck 9y agoYes. You can only buy this if you can show income over 200k USD for the past 2-3 years (or meet other criteria which are less common for people on HN). https://www.investopedia.com/terms/a/accreditedinvestor.asp https://www.investopedia.com/terms/a/accreditedinvestor.asp
- matte_black 9y agoThe HN community has fairly high net worth on average, I wouldn’t be surprised if a good amount here were accredited.
- greenyoda 9y agoMy guess is that there are a lot of young people on HN who may have negative net worths - just got out of college a couple of years ago and still paying off student loans. Probably more of those here than there are millionaires.
- matte_black 9y agoDoubt it. For one, HN is a global community and in many other countries the problem of college leaving you with crippling debt isn’t as big as what you see in America. And second, the largest demographic in HN by far are straight white males, who often come from middle class families with high earning incomes, enough to pay for education on top of whatever scholarships are earned. Aside from that, many have been in the tech industry for years or even decades earning six figure salaries. Assuming they keep decent savings invested or have had a few big wins it’s easy to see how this crowd can have some big pockets. And then there’s a sizable amount of outliers: cryptocurrency millionaires, founders of acquired companies, early stage employees post IPO or even current founders of multi-million dollar companies, maybe even a billionaire or two.
- iMuzz 9y agoThere are many people ("traditional" hedge fund managers) outside of the crypto world that want "exposure" without having to figure out which ones to pick. This seems like a perfect product for them. But from what I understand.. If $100 in invested into the index fund, $67 of bitcoin is bought, $27 of Ethereum, $7 of Bitcoin Cash, and $4 of Litecoin. Bitcoin - 62% Ethereum - 27% Bitcoin Cash - 7% Litecoin - 4% Doesn't that make it so that the market favors incumbents?
- evrydayhustling 9y agoYes, by design! The most traditional way of deciding index weights is by market capitalization: if the world has thus far allocated more to Bitcoin than Ethereum, the index will too. Besides concurring with past "wisdom", this method minimizes management overhead. If Ethereum doubles in price tomorrow, so that by market capitalization it should have similar weight to Bitcoin, the index will already be "in position" because the value of it's eth holdings will have doubled alongside.
- sleepychu 9y agoI hadn't considered this, why do you ever need to rebalance then?
- evrydayhustling 9y agoPrice is one of two inputs driving market capitalization - the other being available supply. Since many cryptocurrencies continuously issue new supply, relative supply can change over time. The Coinbase Index rebalances once a year to track this change. The other cause of rebalance will be if they add members to the index, which would also upset all the ratios.
- habosa 9y agoKind of sad when a major player likes Coinbase invites the pure speculators in. Yes I know that 99% of people were just speculating before but at least they had the possibility of transferring their crypto assets off the exchange and using them for something. Now it's just some magic number you can root for. It's no more interesting or decentralized than any other financial instrument. When you think about it, crypto currencies may have been too successful. The market got so big that it has to start looking like every other financial product instead of something different with a chance to shake up finance.
- DennisP 9y agoPart of the problem is that if you buy a coffee with cryptocurrency, the IRS wants you to pay capital gains on that transaction. Personally I've avoided actually using crypto because I don't want the hassle. Germany recently passed a law that excludes small crypto transactions from tax reporting. The U.S. already has this for foreign currencies.
- zone411 9y agoCoinbase also confirmed on CNBC that their transaction volumes are lower compared to the peak in Dec/Jan - matches up well with lower transaction volumes in Bitcoin and Ethereum (despite transaction costs going down), fewer new wallets created daily, and fewer searches (Google Trends).
- ttoinou 9y agoFrom this post : Coinbase Index is a measure of the financial performance of all assets listed on GDAX, weighted by their market capitalization. Methodology : https://am.coinbase.com/documents/cbi-methodology.pdf https://am.coinbase.com/documents/cbi-methodology.pdf The index level for CBI is calculated by dividing the sum of the current USD market capitalizations of all constituent assets by the Divisor I don't see how anything is weighted, it's just the sum of capitalizations expressed in USD divided by a weird divisor they control to keep the index smooth
- hexane360 9y agoThat's automatically weighted by their market capitalization. Capitalization in USD = price (USD/coin) * capitalization in coins
- iMuzz 9y agoFrom their Twitter Account. I wonder what kind of "broader digital assets" they are talking about here? Tokens? ERC721? "We’re working on launching more funds which cover a broader range of digital assets. Stay tuned."[0] [0] - https://twitter.com/coinbase/status/971156625951145985 https://twitter.com/coinbase/status/971156625951145985
- justinalanbass 9y agoI have attempted to duplicate this index fund manually by purchasing the top 25 cryptocurrencies (market-cap weighted) over the past year or so. I'll say that it was hardly worth the enormous work involved, and these index funds cannot come soon enough to non-accredited investors. In some cases it's not possible to do perfectly alone: NEO has a minimum unit of 1 coin, and so if you wanted it to not be overweighted, you'd need to have a total portfolio that is an integer multiple of $6700 right now. However, I would not buy this fund from Coinbase since they are not a neutral player, and the market is not regulated yet. There are still great advantages in owning coins yourself - I expect that, as an average investor, I will certainly be prone to manipulation in some way. Alas, the greatest gains are probably long-since gone. No risk, no reward.
- zone411 9y agoWhy was there enormous work involved? Were you rebalancing very often? Note that Coinbase's fund will be made up of only four cryptocurrencies, not 25 like yours.
- slg 9y agoYeah, this is an index of 4 securities and is rebalanced annually. Coinbase is charging a 2% fee for what amounts to automating a max of 4 transactions a year. I get that people are excited about cryptocurrencies becoming available in more traditional investment vehicles, but this particular index fund seems almost completely unnecessary.
- froindt 9y agoI'm admittedly not up on rebalancing policies. With a fund of highly volatile assets, would rebalancing more frequently be necessary? I'm not thinking daily, but perhaps every month or so?
- solarkraft 9y agoI believe so. The worth of your portfolio is the worth of the assets. Bitcoin dropped a ton in even a month. There are still changes of a few percent possible in less than a day, so yearly balancing sounds insanely dumb to me.
- JustAnotherPat 9y agoFrom https://am.coinbase.com/ https://am.coinbase.com/: >* Coinbase Index Fund will invest in assets in proportion to their relative market capitalizations and rebalance annually on January 1st. This strategy will track Coinbase Index (Fixed Supply) - a modified version of Coinbase Index which is adjusted to remove the effect of supply increases, so that it can be tracked by investors. For more information, see Section 6 of the Methodology and Construction. So if you invest in this, you're basically making a bet that 'the flippening' will not occur because you would lose bigly relative to the market if bitcoin tanked since they don't rebalance for a year (which is forever in crypto).
- ThrustVectoring 9y agoI'd avoid this. Coinbase knows the time and price of potential crypto entrants, and this fact can be manipulated to make the fund the bag-holder for shitcoin pump-and-dumps. Like, a fundamental thing about market-cap weighted index funds is that they buy a fixed percentage of a security in the index, regardless of price. If the fund has 1/100k of the market cap of all the coins listed on Coinbase, you can buy 1/100k of any coin and offload it at whatever price you can manipulate it to at the date it enters the index.
- beaner 9y agoThat seems unlikely given GDAX has publicly released it's criteria for listing new assets. https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.gdax.com/static/digital-asset-framework-2017-11.pdf&ved=2ahUKEwi89vuD-9jZAhUj6YMKHUYiDOIQFjAAegQIBRAB&usg=AOvVaw2rgeXVkdN62gvvzv3y81gH https://www.google.com/url?sa=t&source=web&rct=j&url=https:/...
- TorKlingberg 9y agoSince nobody has posted it yet, the composition is: * Bitcoin 62% * Ethereum 27% * Bitcoin Cash 7% * Litecoin 4% So don't expect any of the more obscure cryptocurrencies.
- lavezzi 9y ago+ Because they aren't listed on Coinbase yet, that is obviously subject to change as time goes on
- DINKDINK 9y agoThe potential for this fund to motivation market manipulation is large: Given that the fund rebalances annually, all market manipulators need to do is 'paint the close' on the year, Coinbase is dictated by their terms to go in and buy up a bunch of the coins rebalance on that 'market cap' that had their close painted, and then the painted coins are dumped. I.e. eating up ask liquidity close to year end forces Coinbase to buy up that removed liquidity at a premium.
- forgotcreds 9y agoCool. Maybe now invest some time in fixing your abysmal customer support?
- cocktailpeanuts 9y ago"Index fund" has a meaning if the economy itself the fund is built on top of is stable. For example, stock market index fund makes sense because stocks are built on top of capitalism, which has proven to work for a long time. Nobody would buy a index fund from a communist country, because time has proven communism is not profitable. I think people are missing the point if they're investing in crypto index funds, because the whole point of cryptocurrencies right now is that the economy it's built on is extremely unpredictable. The whole point of "index fund" is to minimize risk, but they're not exactly minimizing risk since the whole industry could just go to zero if something radical happens (for example BTC crashes), while not really getting a good deal in terms of upsides which you can get by actively trading. For most people who lack knowledge I think a better strategy is to invest in aggressive crypto hedge funds which are springing up like crazy nowadays--that is, if you value the potential gains more than potential loss. And for the rest of those who are risk-averse, I would just keep it in the bank if I were them. Risk-averse people investing in cryptocurrency is like going to las vegas and thinking they'll make tons of money.
- icelancer 9y ago>>For example, stock market index fund makes sense because stocks are built on top of capitalism, which has proven to work for a long time. Nobody would buy a index fund from a communist country, because time has proven communism is not profitable. That is not what index funds are for, or aren't for, at all. Parts of bond index funds I own are invested in "communist" countries and I'm glad to have the diversification.
- cocktailpeanuts 9y agoThere is no communist country in the world right now...
- bloak 9y agoWas there ever? The Warsaw Pact countries had "communist" parties, but the country itself was usually called "socialist", and the propaganda tended to refer to "building socialism", as if they hadn't even finished socialism yet, let alone communism. So "communism" seemed to be a sort of nirvana that people were supposed to eternally strive towards rather than something that they could claim with a straight face they already had. Anyway, China is ruled by a "communist" party, and I guess they have as much right as anyone else to decide what they mean by "communist", or whatever the corresponding expression in Chinese is. Of course the lack of consensus about what "communism" means is as nothing compared with the confusion about what "capitalism" means. We can't just follow Marx because Marx was writing about a world (19th-century England) that no longer exists.
- tonydiv 9y agoHow does this compare to Bitwise?
- bankim 9y agoBitwise has better diversification across top 10 currencies based on market cap. Coinbase has lower entry point of $10k minimum v/s $25k minimum required by Bitwise.
- deleted 9y ago[deleted]
- theCoindexer 9y agoThis is a great move by Coinbase to make "owning more crypto" easier for the average (accredited) investor. But 4 coins != the market. Like others, we've tried to maintain our own index of top cryptocurrencies, and experienced all the same repetitive issues of calculating asset shares, etc. So we created a tool to help ourselves, and hopefully others: https://thecoindexer.com https://thecoindexer.com. It takes an input portfolio (on CoinFYI or others) and periodically calculates and emails the optimal* rebalancing trades to match a target index. Current indexes are based off CoinMarketCap's top 5, 10 and 25 assets. We've still got a lot of kinks to work out, but feedback/suggestions are welcome. *optimal = fewest # of trades on preferred exchanges
- therealviv 9y agoBrilliant. Much safer solution than handing over keys etc.
- oil7abibi 9y agoDo you have any open APIs? I’m working on a portfolio application and would love to offer an integration like this.
- granaldo 9y agoHow about buying into top 10 coins from CoinGecko https://www.coingecko.com/en https://www.coingecko.com/en weighted by multiple metrics and they got https://www.coingecko.com/en/crypto_index/crix https://www.coingecko.com/en/crypto_index/crix
- Meekro 9y agoFor anyone wondering why this is better than just buying the coins yourself, here are some reasons: 1. Non-technical investors don't know which coins to buy. There are some genuinely good coins, and lots of scams, and they look pretty much identical to the untrained eye. 2. Non-technical investors don't know how to store coins safely. Words like "cold wallet" and "Trezor" don't mean anything to them. Even if they wanted to learn, it's hard to separate useful information apart from scams. There was a guy a while ago who bought a hardware wallet on ebay and lost all his coins. Even smart people sometimes do dumb things, and in this case it could cost them everything. 3. Investment firms with more than 1 person involved have additional challenges. Who gets the coinbase login? Who gets access to the safe deposit box where the private keys are held? If only one partner has access, he might steal the coins and say "we got hacked" and no one can prove otherwise. Or he might get hit by a bus, and then no one else can get the coins out. If multiple partners have access, one of them might screw the others and steal the money and there's no way to know who did it. Crypto nerds will say "use multi-sig wallets," but that's way too complicated for most people. Screw-ups when creating a multi-sig wallet could render your coins unspendable. 4. If you make a crypto portfolio (as opposed to just holding bitcoin), you'll trigger a capital gains event each time you rebalance. Many people don't seem to realize that crypto-to-crypto trades are still taxable, but it's true. If you want to rebalance more than once per year, it becomes short-term capital gains and your tax rate goes way up.
- koolba 9y agoRegarding #4, you may still have a capital gains event[1] on rebalance depending how this is structured. A good analogy is the tax treatment of mutual funds vs ETFs. [1]: Or more likely loss.
- freech 9y ago> There was a guy a while ago who bought a hardware wallet on ebay and lost all his coins. Was this because he sent his coins to a paper wallet that the seller generated for him? I would be impressed if someone had actually managed to produce a fake trezor, but even then, it's pretty straightforward not to buy them on ebay.
- 9y ago
- snissn 9y agoit's not particularly diversified, it's basically just 70% btc/bch and 30% eth
- freech 9y agoThe entire point of cryptocurrency is to control it yourself, by owning the private keys. Instead of investing in ethereum with coinbase, why not invest in a centralized smart contract platform (much easier and even safer as long as you trust the person who runs it)?
- PNWChris 9y agoDang, I was looking everywhere for something like this just a couple months ago! I ended up digging through the GDAX API docs, writing a node script, and scheduling it [0], but I'd rather not be in the business of script maintenance. The fees and accredited investor requirement will keep me with what I've got, though :/ [0]:https://www.chrisjeakle.com/projects/#gdax-automation https://www.chrisjeakle.com/projects/#gdax-automation
- techman9 9y agoOh man, I do not envy your tax situation...
- PNWChris 9y agoIt’s been shockingly easy, actually! I do relatively few orders (2 per month) and can get a record of my filled orders [0] on the day I know my buys will occur. I plug those automated buys into a spreadsheet where I maintain a record of my orders. That spreadsheet does a FIFO capital gains calculation, and I’m good to go. I must admit, I haven’t sold yet, so I may just be niave about how 2018 taxes will go! [0]: https://www.gdax.com/orders/fills/BTC-USD https://www.gdax.com/orders/fills/BTC-USD
- ellisv 9y agoAlternatively there is BITTWENTY (BTWNTY) which is a more diversified index.
- wepple 9y agoWarning: you may want to read up on all the major problems Coinbase have had & are having with locking people’s funds up and going unresponsive before giving them actual money. Frustrating that they’re still launching new products instead of fixing what’s broken.
- toothbrush 9y agoThis looks pretty similar to Crypto20, https://crypto20.com/en/ https://crypto20.com/en/. However, Crypto20 is explicit about your token giving you proxy ownership of the underlying assets. I am not an expert so i'm not sure if it's a scam or not, but so far it seems reasonable. Much less stressful than maintaining one's own portfolio, too.
- quickthrower2 9y agoReminder people. Crypto exchange tokens held tokens means counterparty risk. You don't hold the crypto. They owe you it and they may not pay out due to court orders, bankruptcy, hackings, they think you are laundering money, a terrorist etc.
- trophycase 9y agoI wish that I could choose my own percentage weighting (rather than a market cap based weight) and have it rebalance to whatever that is. Seems like a good service for users who couldn't write it themselves.
- deleted 9y ago[deleted]
- comboy 9y agoWow, that doesn't seem wise (at the first glance). These market caps are really easy to manipulate, especially when you only have to do it annually and the exact time is specified. Huuge shorts. Bonus points for doing something like BCH before that to force your coin onto Coinbase (because otherwise people are gonna complain Coinbase is stealing their coins from the forked chain).
- eftychis 9y agoReading the weighting section of the index fund ( https://am.coinbase.com/documents/cbi-methodology.pdf https://am.coinbase.com/documents/cbi-methodology.pdf -- linked in a few sibling comments too) the following statement, while standard language and approach, makes me wonder in this case: "The market capitalization of each constituent asset is calculated as the price of the asset multiplied by the supply of the asset." There are always some small mistakes in the supply of the asset. Bitcoin however has a considerable amount of lost coins. This has been discussed a lot and there are a couple of studies out there (here is a quick link via fortune (placeholder till I find the original study): http://fortune.com/2017/11/25/lost-bitcoins/ http://fortune.com/2017/11/25/lost-bitcoins/). They seem to ignore this fact in their calculations (they follow a fixed supply approach it appears. Does anyone with experience in investing have any opinion? Shouldn't indexes at least attempt adjustment? Note paragraph 2.10 mentions that no supply adjustment ever is going to be made. I think this considerably inflates the nominal value of the fund (for the eyes of the world). Thoughts?
- dahdum 9y agoHow would that increase the nominal value of the fund? Worst it would do is inflate the market cap of a specific coin in relation to others, altering the weighting a little bit. They note there's no definitive way to calculate true supply so they aren't going to get in the business of trying to do so.
- omarchowdhury 9y agoIf they adjust the price of the coins by removing lost coins from the supply (how would they even know with certainty which coins are lost, making this definition on their own would be going against the sanctity of the blockchain) then the price per coin would increase.
- wtvanhest 9y agoThere is a concept in index weighting called float-adjusted where you remove shares that have not been issued. that isnt really the same as what you are talking about, but it is a similar concept. The real problem would be finding out how many bitcoin exist or have been lost. I dont think there is any way to do that at this time.
- yashksagar 9y agoBy having an index fund, are they saying crypto investing is safe now?
- joshschreuder 9y agoIf anyone's interested in a similar concept, Iconomi does a number of managed funds. I don't believe any are actual indexes (BLX comes closest with market cap weighted - https://www.iconomi.net/dashboard/#/daa/BLX https://www.iconomi.net/dashboard/#/daa/BLX) but they do cover a number of different crypto spaces. Also Crypto20 does an index of the top 20: https://crypto20.com/en/ https://crypto20.com/en/
- psteinweber 9y agoYes, much more interesting than the Coinbase 4-coin-index, for me at least. I have a small amount in one of their DAAs, and as a customer, I really enjoy the transparency in their communication. They do regular Reddit AMA's (https://www.reddit.com/r/ICONOMI/ https://www.reddit.com/r/ICONOMI/), financial reports on Medium (https://medium.com/iconominet https://medium.com/iconominet), and simply make me feel like there are real and motivated humans behind. Quite rare in crypto.
- msoad 9y agoRepeat after me: A good currency is a bad investment
- brokensegue 9y agobut what about a basket of four bad currencies?
- cableshaft 9y agoFour good investments!
- Casseres 9y agoAAA rating!
- cliftonk 9y agoI am mystified as to why coinbase is not performing float or liquidity adjustments.
- modeless 9y agoWhen Coinbase adds a new coin, will they buy the coins for the fund before or after the announcement? If before, then this fund would actually be useful as a way to front run the market. But I'm guessing it would be after.
- drcode 9y agoAnyone reading this, please spend at least a few minutes considering an alternative investment approach: In my opinion, most HN readers are technical enough that if they read up on the top 10 coins they would find that quite a few of those coins have extremely unconvincing future prospects- I won't name names, but several of the top 10 coins are (in my estimation) based on EXTREMELY UNCONVINCING ideas. Before jumping on an index fund, a person on HN should at least consider the possibility that they may be better off doing some homework and reading up on the top 10 coins and then only investing in those that have a convincing technological basis- Index funds are not always a sensible strategy for markets that are as new as the cryptocurrency market, since proper price discovery in asset markets is a slow process that requires time.
- xrd 9y agoAccredited investors only. Sigh.
- mlerner 9y agoI work at Bitwise Investments (venture backed by Avichal Garg - a YC partner), and some people know us as "the first cryptocurrency index". We think Coinbase releasing an index is great for the space - diversification is super important for a crypto portfolio and it is good to see other people working on the problem. We offer a different basket (Coinbase only offers the coins available on Coinbase), have different business model incentives, and different focuses. If investing in a diversifed portfolio seems intriguing to you, and Coinbase's offering doesn't fit your needs, you should check us out: bitwiseinvestments.com Also, we're hiring!
- deleted 9y ago[deleted]
- cimmanom 9y agoOne would think that once there's a stable crypto ETF it'll be included in Vanguard funds and the like.
- pimmen 9y agoIf cryptocurrencies are the currencies of the future and they're not just an investment product for people who want to get rich on hype, prove it to me very simply; spend your cryptocurrency. Really, it's that simple; use all of them to buy something disposable, or even invest them if you want, but if you can't bear the thought of being separated from them for something else then I just don't see how their deflationary model is offset by their ease of transaction. They're supposed to be the medium of exchange between valuable goods and services, they're not supposed to be the valuable good itself.
- philipodonnell 9y agoYou are right to be suspicious, but there are a wide variety of cryptocurrencies, some of which are designed to be a medium of exchange between valuable goods and services and some of which are designed for very different purposes. Not all are deflationary. Some are supposed to be the valuable good itself (as a proxy for some physical asset).
- headmelted 9y agoThis just strikes me as really shady - not because I have any reason to believe that you're not going to get what they're selling you, but that a lot of non-experts in financial products are familiar with the idea of an index fund as a (relatively) safe and responsible long-term investment, when this is clearly neither of those things. Coinbase even describe this as an investment in their description. This has more in common with buying a bunch of lottery tickets in a syndicate for a draw that might not even happen. I wish we'd be more responsible than to call buying cryptocurrency investing. We know what it is. It is not this.
- the_cat_kittles 9y agothe fact that this is the top post really seems to hammer home the fact that hacker news is often actually get rich quick news
- argonaut 9y agoThis is a terrible deal. A 2% annual fee is a hedge-fund-esque fee. For 2% I'd expect an actively managed fund that gets in on ICO presales, carefully vets teams/technologies behind new coins and gets in early, has a strategy for hedging risk, etc. etc. Instead you get a passively managed fund with FOUR assets that are all tightly correlated with each other (they all crash at the same time), that is only rebalanced once a year, and offers no tax benefits. Tax loss harvesting, for example, is not possible - there are only 4 assets to choose from! You could replicate this yourself in a few minutes, and you wouldn't need a script.
- dmichulke 9y agoJust to elaborate: On a yearly basis the only two coins among the top coins that correlate less with the coins listed in the index are Ripple and Stellar. Source: http://cryptoport.net/blog/diversification-i.html http://cryptoport.net/blog/diversification-i.html (my blog, just scroll down to the correlation matrices) EDIT: "don't correlate closely" -> "correlate less"
- ohashi 9y agoBut it's Coinbase, so many people will get excited to get screwed over.
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- zerostar07 9y agoAre index funds the new subprime mortgage packages?
- loeg 9y agoAbsolutely not. Cryptocurrency may be.
- zerostar07 9y agoso how is the index fund not a looming disaster?
- drinchev 9y agoThere is a person who bought 800$ worth of cryptocurrency via 66 coins [1]. On Day 40 the total value is 388.58$. 1: https://66shitcoins.com https://66shitcoins.com
- ebbv 9y agoDoes anyone really think this is a good idea when the crypto market is obviously being heavily manipulated? Specifically by Tether but by others as well. The behavior during the last crash showed obvious pumping and fake buy walls, and was only halted when Tether started printing EURT en masse. The whole thing is insane.
- kwikiel 9y agoThis design will allow Coinbase for adding some tokens they like and profit immensely from large retail base of investors investing passively in anything that Coinbase will list - becoming de-facto token curation network
- denormalize2 9y agoHas anyone heard of the HODL cryptocurrency index fund hodlfund.io? Looks promising, although apparently the ICO is not open yet.
- philipodonnell 9y agoGreat to see innovation in the crypto-index space, but as others point out 2% is way overpriced for some administrative efficiencies and a once a year rebalancing. This is a very 'classic' approach to the diversification problem, but as an alternative financial system we should see crypto-focused solutions that move past this. I'm working with a group of folks on a version of this that re-balances in real-time on GDAX with immediate withdrawls, no pass-thru tax burden, and low monthly fees. If anyone is interested in participating or learning more reach out to me via email to philip at postral dot com.
- dmart 9y agoMost cryptocurrencies (especially the few that Coinbase trades) are still so pegged to the Bitcoin price that it's hard to see any value in this, especially considering the management fee. Click between any of the currency graphs on their main page - they all move together, just with different base values.
- vinchuco 9y agocue the "return to normal" ? https://www.forbes.com/sites/jessecolombo/2013/12/19/bitcoin-may-be-following-this-classic-bubble-stages-chart/#4849024736b8 https://www.forbes.com/sites/jessecolombo/2013/12/19/bitcoin...
- andrewmcwatters 9y agoCurrency isn't an investment.
- twblalock 9y agoWhat will happen to the underlying assets, and therefore the value, of this fund if Coinbase gets hacked?