Coinbase has launched the Coinbase Index Fund, a market-weighted composition of all the cryptocurrencies traded on Coinbase’s GDAX exchange. This is the cryptocurrency equivalent to stock market index funds like the Dow Jones Industrial Average, S&P 500, and NASDAQ.
At the time of this writing, Bitcoin comprised 61.47% of the index, Ethereum 27.17%, Bitcoin Cash 8.22%, and Litecoin 3.14%. As the market caps of these cryptocurrencies fluctuate, their percentage weight in the Coinbase Index Fund will change. Also, cryptocurrencies that are added to Coinbase’s GDAX in the future will be added to the index, and the index will be rebalanced accordingly. For example, Coinbase will be adding Ethereum Classic in the coming months and this will be added to the index fund.
The Coinbase Index Fund will only be open to accredited US investors, with minimum investments of USD 250,000 and maximum investments of USD 20 million. An individual must have assets exceeding USD 1 million and a business must have assets exceeding USD 5 million to be an accredited investor.
Coinbase is operating this fund by the book and has claimed to have covered every legal aspect to ensure investors feel safe, making it attractive for institutional investors looking for a safe and legal way to invest large amounts of money into cryptocurrency.
Clearly, the Coinbase Index Fund is not geared towards average cryptocurrency traders, but towards institutional investors. Additionally, MG Stover & Company will administer the fund, BDO USA will audit, while Cole-Frieman & Mallon, as well as Davis Polk & Wardwell will provide legal counsel.
Eventually, Coinbase hopes to create an index fund that is open to all investors in the world. It is possible that the funds like these will help drive cryptocurrency value upwards if large amounts of institutional money start flowing into them.
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