Coinbase
Coinbase is headquartered in San Francisco California. The firm brokers exchanges of Bitcoin, Bitcoin Cash, Ethereum and Litecoin with fiat currencies in about 32 countries. It offers bitcoin transactions and storage in 190 different countries.
Coinbase’s two core functions are as a Global Digital Asset Exchange (GDAX) that trades a variety of digital assets on a professional asset trading program and a retail broker of Bitcoin, Ethereum, Litecoin and Bitcoin Cash for fiat currencies as mentioned. It also has an Application Program Interface (API) for developers to build applications and accept payments in digital currencies.
Coinbase’s cryptocurrency index fund
The fund will require a $10,000 dollar minimum investment and charge a two percent annual management fee. However, there will be no performance fee. Although this is rare in traditional investment funds, it is becoming the norm for crypto passive investment vehicles.
The Index Fund is the first investment vehicle as part of Coinbase’s new asset management division. Cryptocoins in the fund will consist of all the currencies on the company’s GDAX. At launch it is to contain: 62 percent Bitcoin, 27 percent Ethereum, seven percent Bitcoin Cash and just four percent Litecoin. The fund resembles traditional index funds that mimic the performance of indices such as the S & P or even the entire stock market.
Whenever a new asset is added the fund will be rebalanced. Ripple is rumoured to be added soon.
In the future, Coinbase plans to offer investment vehicles that are not listed to those that are listed on GDAX. However, for now the company feels that keeping to the coins listed will increase the liquidity of the fund.
Reuben Bramanathan, a product manager at Coinbase said: “Index funds have changed the way that many people think about investing. By providing diversified exposure to a broad range of assets, index funds enable investors to track the performance of an entire asset class, rather than having to select individual assets.”
Investing in the fund
Investors can use either U.S. dollars or any of the cryptocoins in the fund to invest in the fund but with the $10,000 minimum. Investors have to be accredited and U.S.-based. Coinbase hopes to removes these restrictions in the future.
New investments can be made once a month. Redemptions can be made quarterly. There is no lockup period.
Funds will be secure
The funds will be held in cold storage by Coinbase. The exchange has considerable experience in keeping high-value assets and even has a product called Coinbase Custody which offers custody services for investment funds.
The fund is expected to launch in a few months but accredited investors are able to sign up now.
Coinbase already has competitors.
Bitwise Investments has the HOLD 10 index sanctioned by the Securities Exchange Commission. Others are allowing investors to create their own basket of custom-weighted crypto assets. However, Coinbase may have an advantage in that it is already a well-established name in the field.
