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S&P Dow Jones Indices to launch cryptocurrency indexes in 2021
- ahelwer 6y agoWonder how the weighting will work. If you don't massively overweight smaller coins, you'd just end up holding like 80% Bitcoin & Ethereum with very little of anything else.
- pmart123 6y agoInitially, the index might be more for performance benchmarking for crypto funds than it would be for passive investing?
- wp381640 6y agoSo crypto funds can follow hedge funds in demonstrating how well they’re underperforming the market
- greenonions 6y agoAnd just like hedge funds, this will give them better access to capital...
- wp381640 6y agoProbably the best strategy tbh, you only have to go to a few spots down to find some bad coins and the edge of the top 10 to find some outright scams
- anm89 6y agoBitcoin cash comes in at #7 on coinmarket cap and while I wouldn't call it a scam, it's not a respectable project IMO. And it quickly gets worse from there over the next 10. Strongly agree that the best bucket is going to be composed of a vast majority of bitcoin and ethereum. I don't believe crypto is on the whole in a bubble right now but the fact that Bitcoin Cash has a market cap of >$5B is one of the biggest things that makes me question that.
- ajay-d 6y agoI was more shocked to hear there are at least 550 actively traded coins.
- safog 6y agoIt's a good time to write a crypto whitepaper and put up a fancy website. It's not alt-season yet .. when it starts is when you see the real shitcoin proliferation. Wouldn't be surprised if the number is in the 1000s.
- safog 6y agoI think BCH is a reasonable idea, block size is a problem with BTC and increasing it is fine even if it makes it less likely that normal users will run full nodes. The scumminess of it comes from people like Roger Ver who peddle it as the "true" BTC. e.g., bitcoin.com is owned by the BCH folks and they have several intentionally misleading things there that try to re-brand BCH as BTC and BTC as BTC legacy or whatever.
- anm89 6y agoI agree, that community is it's own worst enemy.
- seibelj 6y agoBitcoin Cash is a solid project, multiple implementations of the client, real developers. I don't personally own any, but it isn't a fraud.
- lawn 6y agoThat you take Bitcoin Cash as an example of a non-reputable cryptocurrency is pretty sad. (And it's #5 not #7.) Ripple is for instance not a cryptocurrency, and everyone knows about the scam that is Tether. Litecoin has zero development (except to copy what Bitcoin is doing) and the development in Bitcoin itself has some serious issues.
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- TuringNYC 6y agoIt wouldnt be uncommon to have multiple indices and one that is "Crypto ex-BTC ex-ETH"
- bitxbitxbitcoin 6y agoETH and BTC dominance is closer to 73% at the moment.[1] But your point is still very much valid. [1] https://www.coingecko.com/en https://www.coingecko.com/en
- puranjay 6y agoI would assume you'd go by the market cap and trading volume of different coins. So BTC and ETH would dominate, but you'd also have to make room for LINK, XRP, DOT, etc.
- NikolaeVarius 6y agoIs this just a way of buying multiple cryptocurrencies without needing multiple clients and a fee?
- mrosett 6y agoNo - indices are basically a (possibly weighted) average of prices. They're informational, not an investment product. That said, investment companies will frequently launch funds that track some index. So the investment products like what you're describing may follower.
- dmurray 6y agoThese days, it's common for the tail to wag the dog, and to have an index that only exists to be tracked by some fund. (The Index of Stocks that Fund Manager X likes). It's not clear to me from the press release whether S&P Dow Jones are doing that here, or if they're planning to have a flagship index that lots of fund managers will be trying to track or beat.
- dylkil 6y agoThere are currently projects on ethereum which implement indices in a decentralised fashion. Take a look at PieDAO [1] if you are interested. Included assets, their weights and all indices are governed by the DAO [2]. [1]https://www.piedao.org/ https://www.piedao.org/ [2]https://www.investopedia.com/news/daos-and-potential-ownerless-business/ https://www.investopedia.com/news/daos-and-potential-ownerle...
- Cd00d 6y agoTangent question: why do financial services pluralize index as 'indexes' rather than 'indices'? Throws me off every time, and seems to be an industry thing.
- chrisa 6y agoLooks like a super common question - nasdaq has an article about it: https://www.nasdaq.com/articles/indexes-or-indices-whats-the-deal-2016-05-12 https://www.nasdaq.com/articles/indexes-or-indices-whats-the...
- pmiller2 6y agoI think I agree with that article. I'm used to seeing "indices" in a mathematical context, referring to an object that labels a particular subobject of another object. It seems a lot like the difference between "vertices" and "nodes" in a graph. Go to the math department, and you'll hear people talking about vertices. Walk down the hall to the CS department, and it's all nodes, all the time. I have no idea why this is, but I suspect some kind of cultural thing. Maybe the CS term and the math term originated independently? Kind of like how you talk about machine learning in CS, but a good portion of ML would actually be classified as statistics by the math and stats departments.
- ajay-d 6y agoThanks! This read was more interesting than the crypto article
- ninly 6y ago'indexes' has been a just-fine variant of the plural for a very long time -- actually it's the first one listed in Merriam-Webster, so probably the more common variant, though I haven't dug into other references. That said, you're correct that the more common or preferred variant will depend somewhat on the culture/community/industry. The house style guides in finance probably tend toward 'indexes' -- in part because an index is a branded product they produce, so consistency is important -- while software/tech companies (or at least people in them) may tend prefer 'indices'.
- elevenoh 6y agoNo brainer considering to buy ETH on the stock market via grayscale you're paying a 104% premium. The demand (e.g. within registered & margin accounts) is there. https://ycharts.com/companies/ETHE/discount_or_premium_to_nav https://ycharts.com/companies/ETHE/discount_or_premium_to_na... Aside: Seems covid is accelerating understanding & adoption of crypto. I remember when I couldn't perform a wire transfer for a full week back in March '20 - at one of the most reputable banks globally. I lost money due to this. Never again.
- anm89 6y agoWhen you say stock market, do you actually mean stock market or a crypto exchange? I'm not under the impression that there is any way to buy ETH via any stock market.
- skyyler 6y agoThey linked an eth trust that can be traded on OTCQX. Did you even read their comment?????
- wlesieutre 6y agoGoogle found this: https://grayscale.co/ethereum-trust/ https://grayscale.co/ethereum-trust/ Offers a bit more explanation than the parent link. > Grayscale Ethereum Trust is solely and passively invested in Ethereum, enabling investors to gain exposure to ETH in the form of a security while avoiding the challenges of buying, storing, and safekeeping ETH directly.
- elevenoh 6y agostock-market traded securities that hold crypto underlyings.
- joncrane 6y ago> I couldn't perform a wire transfer for a full week back in March '20 - at one of the most reputable banks globally Can you explain this in more detail?
- flixic 6y agoCoinbase used to have an Index Fund weighted by market cap. Launced in 2018[0], it was shut down just a couple of months later[1]. From the articles at the time, it seems that the major reason for the shut down was that the market was going down, and all investors saw losses (because it was 2018 in crypto). Maybe they will resurrect this idea now that the market is going up. [0]: https://blog.coinbase.com/coinbase-index-fund-is-open-for-investment-61217606f1ef https://blog.coinbase.com/coinbase-index-fund-is-open-for-in... [1]: https://www.coindesk.com/coinbase-confirms-shutdown-of-crypto-index-fund-product https://www.coindesk.com/coinbase-confirms-shutdown-of-crypt...
- StratusBen 6y agoI would imagine because they knew this was coming.
- pmiller2 6y agoThat raises a good question: so, there are crypto indices now. How do you buy the index? In other words, who is going to securitize cryptocurrencies? Until there's a way for someone to login to a brokerage account and buy, say, ticker symbol CRYPT, I don't see where having an index maintained by a company is all that useful.
- modeless 6y agoThere have been many attempts to create ETFs for Bitcoin, most famously https://coin-etf.com/ https://coin-etf.com/. They've all been denied by the SEC so far. But an index like this is likely a step toward SEC acceptance.
- pmiller2 6y agoWhy? Why does having an index matter, if the SEC didn't even like single coin funds?
- modeless 6y agoSome of the SEC's objections to Bitcoin ETFs revolved around the possibility of market manipulation due to the markets being small, unregulated, and overseas. If the index is constructed in a way that resists manipulation by unregulated overseas exchanges, and if it is used as the basis for other products like options in regulated domestic markets that gain significant trading volume, then it could go some way toward addressing the SEC's concerns.
- aazaa 6y agoI suspect this move will provide new motivation to approve an ETF that tracks the index. The Winklevoss Bitcoin ETF, years in the making, appears to be stalled as do the other Bitcoin ETFs.
- blackrock 6y agoSo is Bitcoin finally becoming legitimate?
- bitxbitxbitcoin 6y agoJust ask Larry Fink.
- smabie 6y agoIf you count that some of the most sophisticated market makers and trading shops have entered the space then yes. If you count the fact that most less sophisticated investors have not entered, then no. But I think we could be seeing a situation in the next 5 or 10 years when the market cap of bitcoin grows somewhere between 10 and 50 fold.
- monkeydust 6y agoThere is already a crypto index 'BCGI Bloomberg Galaxy'. Info including methodology here: https://www.bloomberg.com/professional/product/indices/bloomberg-galaxy-crypto-index/ https://www.bloomberg.com/professional/product/indices/bloom...
- finikytou 6y agothis + the entry of tesla within S&P + the destruction of small businesses is the perfect recipe for chaos and years of reviving 2008 era
- elevenoh 6y agoCould you elaborate? We're definitely in an accelerated-transition period w/ an uptick in inequality, if that's what you mean.
- finikytou 6y agocryptos just like tesla stock are roller coasters. the sp500 is an indicator of stability used by most of investors to jauge the health of the markets. add tesla to the sp500 (day after day spiking up and down like no other stock) and you create instability. the crypto has always been instable so managing indices on it... and at the same time you see that many people lost their jobs, went into loans they re not able to refund. not even talking about the fall of the dollar. I think all added its gonna be bad.
- elevenoh 6y agoThere's points in here I could spend time refuting. e.g. I would disagree that 'add[ing] tesla to the sp500 = instability'
- raziel2701 6y agoCovid hits, Fed and US govt. unleash trillions of dollars of easy money for corporations and the stock market bubbles up to record all time highs in record time. This is unprecedented. The largest transfer of wealth program continues on and we continue to have a 9/11 worth of deaths at an alarmingly increasing frequency. Unemployment is high, food lines are staggeringly long, small businesses are cracking, and we don't support people to stay home: more stimulus money going directly to the lower socioeconomic classes is absolutely needed to help them stay home and stay safe. So the markets are totally decoupled from the economy. Reality is gonna hit that someday and then, only then, will we see the panic go through Congress once again as they pass all kinds of amazing bills that while they do in the name of helping the little guy, it mostly provides protection to all these zombie corporations that need another dose of easy money to stay alive. So we throw away all this capital and keep the transfer wealth program alive that sucks the future out of the younger generations to keep the shareholders happy. Socialize the losses, privatize the profits. It feels like we're about to reach a tipping point. The number of scammers, grifters, conmen is too damn high, even the president is one. What's happening?
- iamspoilt 6y agoSomeone please explain this to me: How is any cryptocurrency even considered an investment vehicle? I would classify myself as Boglehead and I believe in the fundamentals of investing in stocks because in all it's technicality (and given the buy-and-hold strategy), you are investing in a business by owning a part of it which naturally means that you will and do get the returns on it, both in terms of profits (dividends) and and value growth (appreciation of the stock value). And conventional wisdom of lending also applies to bonds. That being said, again, why would cryptocurrency ever be considered as a good investment vehicle? Isn't it analogous to me investing my money in buying USD or the British Pound (or a well diversified currency ETF), something I don't see a lot of value in as well.
- macspoofing 6y ago>How is any cryptocurrency even considered an investment vehicle You're right that crypto currencies are not like equities. It's an investment vehicle in a similar way that gold is considered an investment vehicle. >why would cryptocurrency ever be considered as a good investment vehicle That's another question. I don't think it's a good investment vehicle.
- vocatus_gate 6y agoI'll try to use my elevator pitch: With cryptocurrency, you're right they're not an "investment" in the traditional sense. Right now more of a long-term gamble. In my opinion the value is in the network and the ability to move money instantly (or at very least faster than traditional methods), securely, to anywhere in the world for a fraction of a cent. That ability alone is valuable and hasn't existed until now. There are other arguments along the lines of deflationary vs. inflationary, anonymous vs. private, irreversibility of transactions (no charge-backs) that are good or bad depending on your views, but in general crypto represents a brand-new "investment" (or gamble if you like) for this generation. The different cryptocurrencies that various teams are building follow different philosophies, but I think the space in general is pretty interesting.
- iamspoilt 6y agoOkey, calling it a "long-term gamble" only sounds fair to me. Talking about value, isn't blockchain / crypto analogous to a medium that enables moving money quickly? If yes, internet would be similar in some sense (we have instant local money transfers these days) but we don't have anything that tracks internet as an investment. Coming back to it, I can rationalize myself investing in a money transfer business that is build on blockchain (think Transferwise that uses a mix of technology and banking agreements) and generates some revenue for me. But if that middleman can be removed, I cannot suddenly start considering that piece of technology, an investment.
- anthonyhodlbot 6y agoI built a way to enable users to index the cryptocurrency market via exchange APIs and have been operating it for about 3 years now. We've done about 100M in transactions. Some of the indices we built were a top 20 by market cap (10% cap), top 30 by squared root market cap. If you guys want to check it out: https://www.hodlbot.io https://www.hodlbot.io
- safog 6y agoHey - this looks great. Couple of questions: - Does re-balancing create a taxable event? If so, given a bunch of these cryptos trade in BTC pairs, do you generate all the documents necessary to file taxes? - What do you feel about the top 10 currencies changing so rapidly over time? I think every month (or maybe two) the top 10 list significantly changes. Doesn't that accumulate a lot of trading activity and fees? Given the volatility, is there any point to holding the top 10 instead of just holding solid / consistent cryptos like BTC and ETH?
- gruez 6y ago>Does re-balancing create a taxable event? if the rebalancing involves selling something, then yes you have to pay capital gains on it. The only way to avoid this is wrapping your trading activity in a ETF.
- absolutelyrad 6y agoMy bank wouldn't allow me to buy cryptocurrency. Cryptocurrencies let you decide your future, they offer freedom. No banks, you decide where your money goes.
- baby 6y agoI’d be interested in an index tracking the prices of San Francisco rents. I’m waiting for the low to buy.
- levosmetalo 6y agoGreat news. Right now what is holding me from investing in Bitcoin are: - horrible fees - slow transaction - risk of total loss (by loosing wallet, or exchange getting hacked) - no regulation With the Bitcoin ETF I would be getting the following benefits - lower trading fees on stock market compared to stock exchange - fast transactions - no risk of total loss, since ETF shares are protected (at least in Europe by UCITT) - the state standards and controlling mechanisms apply to ETF providers
- misnamed 6y agoThe thing I don't get (and I have the same skepticism about gold ETFs) is that if one is trying to hedge extreme scenarios (e.g. high inflation or even monetary collapse) ETFs being 'protected' could easily fall through. I sort of understand holding one's own gold or Bitcoin, but through and ETF just seems like all the speculation with none of the crisis portability.
- tcoff91 6y agoFor those who aren't very dilligent, the risk of losing one's coins due to loss or theft is likely much higher than the risk of hyperinflation or monetary collapse. Being your own bank is a huge pain in the ass it turns out. Also inheritance planning is much more simple with an ETF.
- misnamed 6y agoI guess I just don't see the value from either side, then. The best supposed features of Bitcoin are lost in ETF form.
- tcoff91 6y agoYou don’t have to care about the benefits to profit off of it. If enough other people care about those benefits to make the price go up, you can still make profits off the ETF . And you can make those profits in a retirement account.
- phkahler 6y ago>> 550 of the top traded coins, This is all I needed to know. The markets are complete fiction these days. We are awash in bullshit investments with zero underlying value.
- Benmcdonald__ 6y agoThere is around 4,000 scam token sales going on right now. Sorry I mean 4,000 innovations and technical experiments in pump and dumps. and 1,984 dead scam coins https://deadcoins.com/ https://deadcoins.com/
- vmception 6y agoS&P is known for making indices of hundreds of names, Russell is known for expanding that concept to thousands Its a little late, being the year 2020, to just notice that there are hundreds (and thousands) of digital assets with markets and communities, to validate your preexisting opinion About a half decade late
- jonahss 6y agoThere's a few cryptocurrency index funds already, where the fund itself is completely automated and shares of the index are tokens on an ethereum contract. So you buy in with ethereum, then can liquidate you shares back to ethereum whenever you want. Still relies on a real-world organization, but pretty cool. https://crypto20.com/en/ https://crypto20.com/en/
- puranjay 6y agoI've been dabbling in crypto since the lockdown (all red, but I've had fun) and this space is like the wild west early days of the internet, with even more scammers. We're past the heady ICO days but now, all the scams have moved to Uniswap. And I might be guilty of being elitist, but I rarely, if ever, see founders with A+ tier credentials (Ivy league education, FAANG/Investment banking/Mckinsey et al) starting crypto businesses. Most coins are also like penny stocks - the trading volume is so low that a single whale can cause big shifts in valuation, making pump and dump schemes extremely easy.
- mlerner 6y agoThe claim about people with "A+ credentials" not working in crypto is off base. Look at the founders of crypto companies from top-tier VCs like a16z: https://a16z.com/crypto/#vertical-landing-portfolio https://a16z.com/crypto/#vertical-landing-portfolio
- puranjay 6y agoI should have been more clear: new crypto projects rarely have pedigreed founders anymore.
- vmception 6y agothats because they all got their reputations sullied when their projects last decade tanked in price 99% Crypto communities do not understand the concept of secession in an organization, and believe that if you earned revenue then the runway should last forever and you should be married to the project forever It doesnt matter, the same people are launching projects now under different aliases. The market doesnt actually care. There is no way to discern between a project that will screw you over versus one that wont, versus one that will rally 5,000% because that has no correlation to legitimacy or any gatekeeping of checkboxes
- sneak 6y agoRarely, yes, but there are some. I also think you could say "new startups rarely have pedigreed founders". Like any business class, most new entrants try and fail. I like a long tail, because it means there's a better correlation of profit and skill in being able to (sometimes) predict a company's future. When everything is a bit safer across the board, you can't convert wisdom into money at quite the same rate.
- intotheabyss 6y agoIf you want to get a piece of DeFi, but don't know which projects to speculate on, you can buy DPI on Uniswap which is an ERC-20 token that tracks the top 10 coins in the defipulse.com index.
- itodd 6y agoHow can this be with Tether existing? Does anyone really honestly think that USDT is legit?
- earthtolazlo 6y agoJust about everyone knows that Tether is a ticking time bomb waiting to blow up the cryptocurrency markets. But for now Tether makes number go up and currently that’s the only thing that matters.
- cwkoss 6y agoTether would be silly to include in the index, but not sure how its existence affects crypto indices otherwise.
- hddherman 6y agoThere have been theories and allegations that Tether is being used to prop up the price of various cryptocurrencies. When I last kept an eye on the wild world of cryptocurrencies, Tether was at around 4 billion USD in total, and now it has grown to 19 billion, while at the same time Bitcoin is at an all time high. As long as Tether continues to exist, any cryptocurrency USD prices should be taken with a spoonful of salt.
- 35fbe7d3d5b9 6y agoBecause it is almost certainly being used to artificially pump the price of BTC up. The only question is: "has the market priced this in, so the current price is a floor and we're waiting for USDT to fall away", or "has the market not priced this in and a major shock will happen when that shoe drops?"
- giantg2 6y agoMore stuff for me to lose money on...
- cryptica 6y agoThe economy is a scam. All the newly printed money which has gone into tech over the past decade is a scam. The only thing that mattered at all was your social connections; doesn't matter what the project was. Is it a coincidence that the two fastest growing assets are owned by people who share a common history? Mark Zuckerberg is the biggest shareholder in Facebook and the Winklevoss twins are the biggest Bitcoin investors... That's no coincidence. It's all about social connections. Your social proximity to Mark Zuckerberg and Winklevoss twins determines your future success 100%. Everything else doesn't matter. If that sounds ridiculous, that's because it is. It's a giant financial pyramid scheme. In any pyramid scheme, those closest to the originator of the scheme make the most money... The difference in this case is that they can keep printing money forever so the scheme doesn't ever need to collapse. The sooner we realize this, the sooner we will be able to fix the monetary system and go back to normal.
- mrlala 6y agoI mostly agree with this. As absurd as it sounds, I think you are basically correct. The people with money do what they can to keep propping things up because they are the ones that massively gain on it. They can afford to keep risking and risking, cashing out when it's convenient and if they take a hit? Oh well, I lost 50%.. or 500m. But you know what? I still have 500 million fucking dollars! As opposed to the normal people in which a 50% loss is devastating. It is such insanity how much money the people pulling the strings have. And they have convinced people "hey throw all your money into our gambling pot of doom!"
- Paul-ish 6y agoIs there any risk these indexes will prop up bad coins, or will provide incentive for people to try to pump their coin onto the index.
- modeless 6y agoI think there is a lot of confusion here. This is not an index fund. You can't buy it. It's just an index, a number that tells you what the price is. It may be a step toward a future index fund designed to track the index, the way SPY tracks the S&P 500 and DIA tracks the Dow Jones Industrial Average. But for now, it's only an index.
- vmception 6y agoS&P has indices that have options contract directly on them. Which is way more fun! Also, index options enjoy the same better taxation that futures contracts do, as they are both Section 1256 contracts. Where no matter how long the trade is, 60% of the profits are taxed at long term capital gains rates and the other 40% are taxed at short term capital gains rates. Gotta read between the lines :) This is a great step for what could be a wildly popular product.
- modeless 6y agoSure, and the futures have been available for a long time already. But an index fund is far simpler and more accessible, and can also be 100% long term capital gains. Most people can't trade options in their 401k.
- vmception 6y agoThey aren't launching an index fund though, so 401K accounts that couldn't hold index options would not benefit in any capacity from this product. This product can only be a reference value and also infrastructure for index options launches.
- andrewmcwatters 6y agoI’m enjoying sitting on the sidelines and watching people “invest” in a digital “currency” that you cannot spend, does not produce cash flow, and whose values are determined by other shmucks buying it from previous shmucks. What a time to be alive. No wonder the S&P 500 CAPE ratio is beyond the 1929 high. No one has any idea of what the intrinsic value is of anything. Investing in companies that don’t make a profit, investing in companies whose investment returns are below real inflation, investing in SPACs that don’t expose financials. You’d literally make more money today taking your cash and starting a business than dumping it in some of these worthless pursuits.
- free2OSS 6y agoWait until you hear about gold index funds/trusts.... Anyway, the reason you buy it is so you don't need to manage the security. Both Binance and Circle Pay ended United States operations causing my friends to either move their Bitcoin or they didn't and had it sold at 3k/coin and can get it from their states "lost money".
- pradn 6y agoIf the value of a cryptocurrency is dependent on the community of the faithful, it's possible to "start the engines of faith", and keep it going for a long time. Fine art has been a large component of generational wealth in the West for the past six centuries. Of course, art has value as aesthetic objects; the same can be said for the potential use of cryptocurrency, however nebulous it may be. Religions, too, demand faith and, once they get started, often have staying power on the order of centuries.
- chki 6y agoThat's a good point, also described in the book Sapiens by Harari: In a way Religion, currency and contract law (and many other things) are all "made up". They have institutions (priests, central banks, lawyers) with magic words (amen, price stability, due diligence) and a certain combination of magic words creates a new reality out of thin air. Think about how weird it is to "sign" an important contract and thereby changing you own future or the future of your company irrevocably. While I'm definitely not a fan of crypto currency and wouldn't seriously consider investing a single Euro into this mess, it's certainly misguided to simply laugh at it being "not real", because a lot of important things are. Obviously the gp makes some other important points.
- myth_buster 6y agoWas this the reason prices spiked last month?
- eli 6y agoCan I use this to go short on bitcoin?
- deleted 6y ago[deleted]
- RyanShook 6y agoMy biggest concern/question with crypto as an asset is tax liability. In the US, if you sell crypto it’s always taxed as property and not as an investment. This has big tax implications that hold it back from being an efficient investment. Obviously returns make the hassle worthwhile still but I’m wondering how this may change in the future.
- deleted 6y ago[deleted]
- ionwake 6y agoIf you have an investment in crypto - is there anyway to leverage that for a FIAT house loan? As in to be approved for a mortgage, but only have to pay the monthly instalments in FIAT ? This way one could keep most of their investment in Crypto through the years and drip feed the loan?