Coinbase Launches Index Fund For Investments Up To $20 Million

Coinbase has just announced that they will be finally launching their index fund, which will be composed of all crypto assets on Coinbase’s exchange services.

Back in March, the Coinbase Asset Management (Coinbase AM) team announced that the creation of the Coinbase Index Fund. The community reaction was positive at first, with community members believing that this fund was going to draw in large amounts of institutional and retail investment.

Announcing: Coinbase Index Fund is open for investment. https://t.co/IVzeO4C6BK

— Coinbase (@coinbase) June 12, 2018

However, it became apparent that this fund would only be open to U.S. accredited investors, disappointing some consumers.

Reuben Bramanathan from Coinbase AM team has just announced that the fund will now begin accepting investments which range from $250,000 to $20 million. It is odd that they will not be supporting investments above the $20 million price range, but the fund may not be able to undertake copious investment amounts at the current time. 

As mentioned earlier, this index fund will be composed of all the cryptocurrencies that are listed on Coinbase’s exchange services, including the upcoming addition of Ethereum Classic.

All cryptocurrencies on the index fund will be weighted in terms of their market capitalization, to ensure that investors receive a performance that mirrors the foremost cryptoassets.

At the time of writing, the fund is composed of Bitcoin, Ethereum, Bitcoin Cash and Litecoin which are weighted as follows: 

This may look like a pretty bland lineup, which doesn’t include any of the ‘hot’ projects which are being talked about on cryptocurrency forums worldwide. However, the aforementioned blog post stated that the fund will be updated with more assets when Coinbase lists them in the future.

This index fund provides another layer of financial security for investors, as Coinbase is insured from asset loss, reducing the risk for prospective investors. Additionally, Coinbase has proven itself to be a reliable place to store cryptocurrencies, as not one hack has been reported in Coinbase’s six years of operation. 

The Coinbase Fund Management team will also be doing all the heavy lifting, rebalancing the portfolio multiple times a year to keep up with the volatile market. However, this increased level of security and management will come at a 2% annual fee, eating into the potential profits of investors. 

The blog post reaffirmed that the Coinbase Index Fund will only be available for U.S. accredited investors for the time being. For the uninitiated, an accredited investor needs to have a net worth of over one million dollars, along with having an income of over $200,000 annually.

This extravagant prerequisite will minimize the number of investors allowed to put money into this index fund, reducing adoption greatly. 

Despite the limited investment opportunity, the Coinbase AM team is working on ways to open up similar investment opportunities to a wider audience, with the blog stating:

We’re working on launching more funds which are accessible to all investors and cover a broader range of digital assets.

Hopefully, these proposed funds will begin their respective launches in the near future, with large amounts of retail and institutional adoption following closely behind.

The past 24 hours have come with two large announcements from this exchange giant, with Coinbase also announcing that they will be supporting Ethereum Classic in the near future. The announcement made yesterday made Ethereum Classic’s price jump by over 15%, with volume nearly quadrupling in the short span of one day.

It is currently unclear how the investors have received this investment opportunity, but community sentiment, whether it be positive or negative, will begin to become apparent over the next few days. 

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