Cryptocurrency index funds are a new buzz in the world of finance. This type of investment seems to be gaining fame in 2019 because it represents an easy entrance into the cryptocurrency world. With cryptocurrency index funds, you can avoid managing and tracking your own portfolio of cryptocurrency coins, and it’s possible for you to spread risk over the different selection of coins. This way, volatility of the market doesn’t affect your investment as much.
What are Cryptocurrency Index Funds?
They work pretty much the same as regular index funds. You buy shares in a fund which consists of a basket of different cryptocurrencies. Then, the fund invests your money across that variety of cryptocurrencies. There are two major ways in which indices are built: by price weighing where the higher priced assets move the index more than the assets with lower prices; and by capitalization weighing where assets with the largest market cap affect the index the most.
If you decide to enter a fund rather than trade cryptocurrencies on your own, you don’t have to worry about opening crypto wallets or tracking coin prices – all of that will be done for you by your fund manager. The fund manager does this for a fee.
In this article, we will bring you the top 5 cryptocurrency index funds to keep an eye on in 2019.
Coinbase first rose to fame as an exchange platform, and recently they started to offer an index fund. This crypto index fund tracks seven digital currencies: Bitcoin, Ethereum, Bitcoin Cash, Litecoin, Ethereum Classic, 0x Protocol and BAT (Basic Attention Token). As expected, Bitcoin takes up over 75% of the fund, followed by Ethereum at around 15%. This is a limited selection of cryptocurrencies. However, it focuses on coins with large market capitalizations which are usually much less volatile than the smaller market cap ones.
Bit20 is one of the first cryptocurrency index funds ever launched, and it is in the form of a CFD (Contract for Difference). This index fund consists of top 20 cryptocurrencies by market cap. The fund revises which cryptocurrencies that make up the top 20 every month. Since it’s one of the oldest cryptocurrency funds, it is a pretty stable form of investment.
Cryptos Fund crypto index fund claims to have the lowest management fee of all funds, and the reason for his low fee is its tracking of Cryptocurrencies Index 30, which gives an objective picture of the state of the crypto market. When you buy in a Cryptos fund, your investment is spread over a wide portfolio of cryptocurrencies. This protects you a bit more from volatility.
Bitwise Asset Management holds the Hold10 index which tracks top 10 cryptocurrencies. This index is weighted by inflation-adjusted market cap. It only allows US citizens and accredited investors to enter. The annual management fee is around 3%.
Iconomi – BLX
This index has tools that allow both beginners and expert traders to invest in cryptocurrency. BLX lists coins that represent 78% of the sector by market capitalization. It offers simple, user-friendly investment options that are ideal for beginners who are still not sure what to invest in.
Concluding Remarks on Cryptocurrency Index Funds
If you are looking to invest in cryptocurrencies, crypto index funds may be an ideal option for you. Cryptocurrency index funds usually have less volatility as well as lower risk than direct investments in crypto coins. Each of these crypto funds on the list has different characteristics. These different cryptocurrency characteristics suit different types of investors. However, you should keep in mind that no investment is 100% safe from risk, and if you’re a total beginner in investing, it’s probably best that you consult a specialist before you dive into an investment.
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