It’s been a long time coming, but Coinbase has finally gotten its own index fund. On March 6, Coinbase announced it would offer an index fund sometime in 2018. Accredited US investors will now be able to speculate on the health of the crypto market through one fund instead of buying individual tokens. This addition from one of the world’s most popular exchanges could help bring new investors to cryptocurrency.
What took so long?
While Coinbase is continually evolving to meet market demand, it’s faced several hurdles since earning 43% of its annual income last December. Since then, rumors of new coins being offered on Coinbase have likely distracted the Coinbase team. Twitter posts about Ripple (XRP) and other cryptocurrencies have necessitated constant careful phrasing on the part of Coinbase, culminating in an official statement quashing the rumors. Since then, Coinbase has faced a lawsuit over insider trading related to Bitcoin Cash. The Coinbase team has also been working to obtain an e-money license for UK and some EU customers, replacing SWIFT in the process. All of this has likely slowed down efforts to create an index fund.
Coinbase’s New Fund
The Coinbase Index Fund will provide easy asset management for investors desiring a managed group of assets rather than trading individual cryptocurrencies. For hands-off investors, an index fund is a new entry point in the crypto market, removing the need to buy individual cryptocurrencies or design a portfolio. Instead, investing in the Coinbase Index Fund, like investing in the S&P 500, means investing in the overall health of the cryptocurrency market.
Coinbase’s fund is made up of 62% Bitcoin, 27% Ether, 7% Bitcoin Cash, and 4% Litecoin. While four cryptocurrencies isn’t exactly a large distribution, Coinbase will automatically add any asset the company adopts in the future. For investors interested in diversifying or ICOs, this new index might be just one part of their portfolios.
Not Everyone can use It
Coinbase has chosen to limit investment in its index to accredited investors in the US, with a $10,000 minimum investment. Since accreditation requires a significant amount of liquid assets or a high annual income, most investors will not be able to access the Coinbase index fund. Coinbase has stated it plans to launch other index funds in the future.
An Index Fund adds Legitimacy
Adding this new option, despite its limitations, adds legitimacy to crypto investment on the whole. Though knowledgeable crypto investors are more likely to use crypto-based index funds like Iconomi, newer investors and those looking for a hands-off investment strategy may find the Coinbase index helpful.