> Investing in Coinbase Index Fund is the easiest way to get exposure to a broad range get of crypto assets. Much cheaper than 2 and 20% charged by most crypto hedge funds, and you get new assets automatically added to the fund as they become available on Coinbase. No rebalancing. [0]
From their actual site [1], the fees are 2% a year so barely better than those hedge funds and absolutely atrocious compared to normal index funds. You are effectively being charged 2% fees for them running some scripts every once in a while to re-balance the fund compared to stock market index funds which charge on average around 0.05%. To make matters even worse, their "index" comprises of only 4 coins! That's hardly an index at all.
I'm not as sure. The 2% fee is a management fee. There's no performance fee. Stock index funds have low management fees because stocks are very liquid and they have people who do the trade executions for them to not move the market very much. Plus, you get lots of investors so you can charge a lower fee and still cover your fixed costs. Given all that, a 2% fee does not seem like it's fleecing investors, but it does seem possible someone else could do it for less.
I think the fact that XRP is missing from their platform is another reason for accredited investors to pass this time. With the number of financial institutions who are already using Ripple's products, or at least have heard of Ripple or what XRP is for, you would assume that a significant number of accredited investors are interested in XRP too. I think most of these accredited investors don't particularly care whether XRP is a "true" cryptocurrency, either.
"Coinbase's trading volumes fell 78% from December to April" [1]. Moreover, it appears trading volume fell for each of those months (on a month-to-month basis). If this trend doesn't reverse, they may soon be in a desperate position.
That's a cherry-picked stat if I've ever seen one. There was a huge bubble in December that clearly couldn't continue forever. Look a little further back; they've grown 30x from two years ago. They are unlikely to be in a desperate position anytime soon. Their revenue from the recent bubble alone ought to carry them for years.
Coinbase can release a bunch of fancy features: index funds, faster trade times, heck even 0 fees. But I only care about 1 killer feature when it comes to a crypto trading platform.
And that is ridiculously high returns and a bull market.
Interesting to think that the private keys for these funds will most likely be split across several pieces of paper (https://en.wikipedia.org/wiki/Shamir%27s_Secret_Sharing) and stored in geographically distributed safes.
That's the only way I can think of doing it offline.
Combining the pieces of paper together to generate the key would need to be done via a signing ceremony. I think coinbase have a patent for this.
I can’t imagine a world where commerce moves from government backed cash to hundreds of different crypto currencies.
Even if <pick your favorite> wins, won’t the majority of these coins go to zero in the long run?
That’s a far different proposition than say the S&P 500, where it’s expected that the majority of companies will be worth more 20 years from now than they are today.
That is the entire point of an index. If you think that cryptocurrency is likely to do well in the future, but you don't know which ones will survive, if you buy them all (market-cap weighted), you'll get an average cryptocurrency return.
If you believe that crypto is doomed, buying an index is a bad idea. If you believe that the future is bright, buying an index might be interesting. As you cautioned, implicitly, though, unlike companies, a held coin doesn't actually make nor sell anything. It's more like buying a forex index than a stock market index.
I think there are some interesting use cases that probably aren't even considered by a lot of people. But I'm not sure how they'll play out.
For example; there could be a time in the future where smaller companies decide to go public through a token (i.e. an ICO, but with a company, not a utility token) at a fraction of the cost it currently takes to do an IPO. I'm not talking about scammy pump and dumps, but an actual company with employees, assets and a business model.
Underwriter banks generally 1) sell IPO shares below value to their investors to cause a first day trading pop, meaning less money into the pockets of the company; and 2) take between 3 to 10% of the raised capital as fees for their efforts. On tens, hundreds of millions or billions of dollars.
I could see crypto being a more efficient way of doing that, cutting out the middleman, and where a token represents a share.
This is a good point, however the volatility is primarily that the space / projects are so new.
The economic structure of each project varies, however most are designed so that if they are used for the utility they offer then they will have a price > zero.
Due to the fixed number of coins in circulation the value should rise in some relationship with increased adoption & time (time due to deflation)
Probably only a handful of coins will be used for B2C commerce. Notable other utility includes:
> Decentralised storage (currently much cheaper than any company can offer)
> Supply chain tracking
> Website monetisation systems (without needing ads)
> Smart Contracts
> Create your own blockchain (backed by existing decentralisation)
In summary: if it's used then a project should succeed.
What if share of the S&P 500 were traded in a crypto currency rather than say dollars as they are today? Wouldn't that crypto currency have more intrinsic value than the dollar?
Not being tied to gold, the dollar only has value because "we say so".
I could see a world where stock exchanges trade in crypto currency <a> and other cryto currencies are pegged to <a> in some way.
Instead, think of it this way. If a coin wins, it must necessarily be 100-10000x larger to "hold" the value of the monetary supply. If there's a 20% chance of "some coin winning" and you have 10 equally probable suspects, each of those suspects has a value of 1/10 of some portion of M1 * 0.20 probability.
I'm surprised they actually moved forward with this idea. From the time this index was announced and tracked on March 6th until the sales began the GDAX index has fallen by ~50% in a bit less than a few months.
I'm surprised you think the price matters. It doesn't. It's an index fund. Crypto traders will trade it regardless if it's low or high. In fact it's probably even better to launch it now (low price = buying opportunity.)
"Accredited investor" is defined in Rule 501 of Regulation D [1]. For natural persons, it means someone with more than $1 million in net worth (excluding one's primary residence) or $200,000 in annual income [2].
> why does this index fund need to only be available to them?
reply
Accredited investors can afford lawyers, to do diligence as well as enforce their claims. They are also better placed to lose money. This combination means people marketing securities exclusively to accredited investors have lower disclosure and other requirements than e.g. someone taking a company public.
Government regulations. The SEC defines an accredited investor as a millionaire, or someone with income > $200k. Millionaires have access to investment opportunities like this that are illegal to offer to non-millionaires. The logic is that millionaires are less likely to go broke because of a bad investment, but it does have a "rich get richer" effect.
There are 15 million HNWIs in the world (net worth >$1m, excluding main residence). There are also 180,000 UHNWIs in the world (net worth of at least $30m).
[+] [-] mrep|7 years ago|reply
From their actual site [1], the fees are 2% a year so barely better than those hedge funds and absolutely atrocious compared to normal index funds. You are effectively being charged 2% fees for them running some scripts every once in a while to re-balance the fund compared to stock market index funds which charge on average around 0.05%. To make matters even worse, their "index" comprises of only 4 coins! That's hardly an index at all.
[0]: https://twitter.com/brian_armstrong/status/10066914902721945...
[1]: https://am.coinbase.com/
[+] [-] dpc_pw|7 years ago|reply
Not to mention that coins are highly correlated, so buying some tiny amount of eg. BTC is enough diversification already.
[+] [-] jeffreyrogers|7 years ago|reply
[+] [-] tonytxie|7 years ago|reply
Last time this came up, I shared an algo I made to automatically index across the top 20 coins. Since then I made a hosted version so anyone can use.
It works on top of Binance. Plus you can automatically rebalance daily, weekly or monthly.
I’ll drop a link here if anyone wants to check it out. Right now, it is free.
https://www.hodlbot.io
[+] [-] haggenballs|7 years ago|reply
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[+] [-] froocpu|7 years ago|reply
[+] [-] JumpCrisscross|7 years ago|reply
[1] https://www.wsj.com/articles/can-the-biggest-u-s-bitcoin-exc...
[+] [-] modeless|7 years ago|reply
[+] [-] AznHisoka|7 years ago|reply
And that is ridiculously high returns and a bull market.
[+] [-] bpicolo|7 years ago|reply
[+] [-] 1ba9115454|7 years ago|reply
That's the only way I can think of doing it offline.
Combining the pieces of paper together to generate the key would need to be done via a signing ceremony. I think coinbase have a patent for this.
[+] [-] weiming|7 years ago|reply
[1] https://engineering.coinbase.com/how-coinbase-builds-secure-...
[+] [-] pests|7 years ago|reply
[+] [-] aczerepinski|7 years ago|reply
Even if <pick your favorite> wins, won’t the majority of these coins go to zero in the long run?
That’s a far different proposition than say the S&P 500, where it’s expected that the majority of companies will be worth more 20 years from now than they are today.
[+] [-] ISL|7 years ago|reply
For the S&P, the index has performed well for decades, but many of the individual components have not. Roughly half of the constituents have been replaced since 1999: http://www.businessinsider.com/sp-500-index-constituent-turn...
And 87% of the companies present at the inception of the index have left the index: https://www.fool.com/investing/general/2015/11/22/3-things-y...
If you believe that crypto is doomed, buying an index is a bad idea. If you believe that the future is bright, buying an index might be interesting. As you cautioned, implicitly, though, unlike companies, a held coin doesn't actually make nor sell anything. It's more like buying a forex index than a stock market index.
[+] [-] charlesdm|7 years ago|reply
For example; there could be a time in the future where smaller companies decide to go public through a token (i.e. an ICO, but with a company, not a utility token) at a fraction of the cost it currently takes to do an IPO. I'm not talking about scammy pump and dumps, but an actual company with employees, assets and a business model.
Underwriter banks generally 1) sell IPO shares below value to their investors to cause a first day trading pop, meaning less money into the pockets of the company; and 2) take between 3 to 10% of the raised capital as fees for their efforts. On tens, hundreds of millions or billions of dollars.
I could see crypto being a more efficient way of doing that, cutting out the middleman, and where a token represents a share.
[+] [-] gtlondon|7 years ago|reply
The economic structure of each project varies, however most are designed so that if they are used for the utility they offer then they will have a price > zero.
Due to the fixed number of coins in circulation the value should rise in some relationship with increased adoption & time (time due to deflation)
Probably only a handful of coins will be used for B2C commerce. Notable other utility includes:
> Decentralised storage (currently much cheaper than any company can offer)
> Supply chain tracking
> Website monetisation systems (without needing ads)
> Smart Contracts
> Create your own blockchain (backed by existing decentralisation)
In summary: if it's used then a project should succeed.
[+] [-] cptskippy|7 years ago|reply
Not being tied to gold, the dollar only has value because "we say so".
I could see a world where stock exchanges trade in crypto currency <a> and other cryto currencies are pegged to <a> in some way.
[+] [-] ericb|7 years ago|reply
[+] [-] pitt1980|7 years ago|reply
If your thesis is 'I think one of these will win, I'm just not sure which one'
and you hope whichever wins, covers the losers
Expecting the final distribution of the coins to follow a Power Law distribution isn't incompatible with the index being profitable.
(the returns of YC are mostly Power Law based, right?)
[+] [-] blondie9x|7 years ago|reply
[+] [-] mrb|7 years ago|reply
[+] [-] null0pointer|7 years ago|reply
[+] [-] JumpCrisscross|7 years ago|reply
"Accredited investor" is defined in Rule 501 of Regulation D [1]. For natural persons, it means someone with more than $1 million in net worth (excluding one's primary residence) or $200,000 in annual income [2].
> why does this index fund need to only be available to them? reply
Accredited investors can afford lawyers, to do diligence as well as enforce their claims. They are also better placed to lose money. This combination means people marketing securities exclusively to accredited investors have lower disclosure and other requirements than e.g. someone taking a company public.
[1] https://www.sec.gov/fast-answers/answers-accredhtm.html
[2] https://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=8edfd12967...
Disclaimer: I am not a lawyer. This is not legal advice. Talk to a lawyer if you are seriously considering this question.
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