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Interesting. 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

Interesting. 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 ago
Automatic 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 ago
    It'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 ago
      Pardon 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 ago
        Rebalancing 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.
  - conanbatt 9y ago
    They put the guidelines of what they consider balancing.
- DennisP 9y ago
  Since it's marketcap weighted, rebalancing is minimal; the only variance comes from the slightly different issuance rates.
Meekro 9y ago
If you bought the 4 currencies yourself, you'd have to pay capital gains taxes each time you rebalance.
- userhacker 9y ago
  unless you change your holdings into fiat thats not the case. You can rebalance with exchanging among your coins
  - Klathmon 9y ago
    This is a somewhat debated topic in cryptocurrency. IMO what you said is not the case. If gold and silver aren't treated "like kind", and facebook and google stocks aren't treated "like kind", why would bitcoin and ethereum be treated like kind? I'm not a tax professional, but I did consult with one, and they confirmed my hunch.
    - derefr 9y ago
      > If gold and silver aren't treated "like kind", and facebook and google stocks aren't treated "like kind", why would bitcoin and ethereum be treated like kind? For the same reason that, say, transferring your wealth from an Irish bank account to a German bank account doesn’t trigger a capital-gains event in the US? I.e., those other things you listed exist “within” the US financial system. Cryptocurrencies exist outside of it, similar to the way assets held in other countries do. If one of these countries had multiple active currencies (say, the GBP and the Euro in the UK), a US citizen telling their UK proxy-holder to start moving money from one into the other has nothing to do with US financial regulation, only UK financial regulation. It just so happens that moving money from one cryptocurrency to another has to do only with the financial regulation of the country known as “the Internet”—which has no capital-gains regulations. (Of course, things are slightly different if the management company exists as a US corporation—in either case. Ask yourself what a US company offering GBP+Euro management would do in this case. The answer should be obvious.)
      - 9y ago
debt 9y ago
I don't think that's how an index works. From the Coinbase literature: "The index level for CBI is calculated by dividing the sum of the current USD market capitalizations of all constituent assets by the Divisor and multiplying the result by 100."

conanbatt 9y ago

Automatic 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 ago
  It'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 ago
    Pardon 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 ago
      Rebalancing 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.
- conanbatt 9y ago
  They put the guidelines of what they consider balancing.
DennisP 9y ago
Since it's marketcap weighted, rebalancing is minimal; the only variance comes from the slightly different issuance rates.

Meekro 9y ago

If you bought the 4 currencies yourself, you'd have to pay capital gains taxes each time you rebalance.

userhacker 9y ago
unless you change your holdings into fiat thats not the case. You can rebalance with exchanging among your coins
- Klathmon 9y ago
  This is a somewhat debated topic in cryptocurrency. IMO what you said is not the case. If gold and silver aren't treated "like kind", and facebook and google stocks aren't treated "like kind", why would bitcoin and ethereum be treated like kind? I'm not a tax professional, but I did consult with one, and they confirmed my hunch.
  - derefr 9y ago
    > If gold and silver aren't treated "like kind", and facebook and google stocks aren't treated "like kind", why would bitcoin and ethereum be treated like kind? For the same reason that, say, transferring your wealth from an Irish bank account to a German bank account doesn’t trigger a capital-gains event in the US? I.e., those other things you listed exist “within” the US financial system. Cryptocurrencies exist outside of it, similar to the way assets held in other countries do. If one of these countries had multiple active currencies (say, the GBP and the Euro in the UK), a US citizen telling their UK proxy-holder to start moving money from one into the other has nothing to do with US financial regulation, only UK financial regulation. It just so happens that moving money from one cryptocurrency to another has to do only with the financial regulation of the country known as “the Internet”—which has no capital-gains regulations. (Of course, things are slightly different if the management company exists as a US corporation—in either case. Ask yourself what a US company offering GBP+Euro management would do in this case. The answer should be obvious.)
    - 9y ago

debt 9y ago

I don't think that's how an index works. From the Coinbase literature: "The index level for CBI is calculated by dividing the sum of the current USD market capitalizations of all constituent assets by the Divisor and multiplying the result by 100."