Cryptocurrency exchange Coinbase announced its crypto index fund for asset management.
Dow Jones Overview
The Dow Jones Industrial Average, sometimes known as DJIA or simply “the Dow”, serves as a reference point for many investors as well as the general public for the overall state of the American economy—through it, trends and shifts in the US can be readily seen. It is the most recognizable. This stock index is comprised of a “price-weighted average of the stocks of 30 large American publicly traded companies,” according to The Motley Fool. It contains companies such as Coca-Cola, Microsoft, Apple, Wal-Mart, and McDonald’s.
What does this have to do with cryptocurrency?
On March 6, Coinbase announced its new crypto index fund which operates under a brand new subsidiary called Coinbase Asset Management which is led by Reuben Bramanathan. According to Reuters, Bramanathan said,
We’re seeing strong demand from our customers and the market generally for a passive investment management product.
The Coinbase Index Fund will be able to serve a similar purpose to the Dow Jones in that it can show fluctuations and trends within the crypto market by tracking some of the most successful cryptocurrencies to date. The index fund will be weighted by market cap and built using the Coinbase index. President of Coinbase, Asiff Hirji, has called this information the “benchmark data for crypto.” Hirji was interviewed on CNBC’s ‘Fast Money’ here.
The Coinbase Index Fund will be of great benefit to individual investors, especially those who are new to the cryptocurrency scene. However, the index fund will only be available to accredited US investors. These investors must also offer a minimum $10k investment.
As Futurism explained it, any investor who puts their money into the index fund will be betting on an asset class—cryptocurrency as a whole—versus any particular coin as has been the method of many day traders.
What is Coinbase and why does it matter?
Coinbase has a strong reputation within the cryptocurrency community, and they are the creators of the order book exchange GDAX, which is similarly only open to accredited investors in order to help protect against regulatory uncertainty. Their exchange is worth more than $1.6 billion, making it the largest cryptocurrency exchange in the world.
Although hundreds of altcoins exist, Coinbase has remained picky in their acceptance of tokens to their exchange, and presently only offer bitcoin, ethereum, bitcoin cash, and litecoin.
This well-known business has the necessary information to most accurately build such an index fund as well as the longstanding reputation that may entice investors to participate.