ETFs (Exchange Traded Funds) simplify investing into a fund to something as easy as buying a stock (1) along with attractive tax rebates. ETFs are typically shares of the ‘fund’ (analogous to a ‘firm’) and the fund itself comprises of financial assets like bonds, stocks, precious metals, commodities and now cryptocurrencies. Since its genesis from the late 1980s, ETFs have seen phenomenal rise in popularity among investors, presently valued over $2 trillion in the US alone since 2015 and absolutely without any cryptocurrency component in their assets. So what’s next?
Last week Goldman Sachs backed crypto exchange Circle (by acquiring Poloniex) has started ‘Collections’ (2). These are ETF like products comprising of a weighted average composition of underlying cryptos (assets) solving similar real world problems. The similarity of the underlying coins/tokens allows for diversification of portfolio in that crypto business niche, there by reducing complete portfolio failure (i.e. lower portfolio risk) from the failure of any small percentage of assets in whole ‘Collection’… very similar to an ETF!
Divya Agarwalla, Senior Vice President, Circle
“Many projects aim to solve similar real-world problems, but take vastly different approaches to get there. Projects like Bitcoin, Bitcoin Cash, Stellar, and Litecoin are trying to build superior payment rails based on blockchain technology so that making payments is as easy, instant, and as borderless as sending an email. If customers are passionate about this category of assets and want to invest, they can simply buy the ‘Payments collection’. Each of the assets in the collection will be weighted by market cap. Customers will also be able to educate themselves on the collections through our in-product content.”
Crypto exchange giant Coinbase also unveiled last month ETF like product (3) of a market weighted portfolio purchase of the first 5 cryptos listed on Coinbase (BTC, BCH, ETH, LTC & ETC) with as little as $25. A portfolio like this has over 80% ROI (Return on Investment) backtested with prices of these cryptos (with market-cap weighted composition) over the last year. 80% returns in the middle of worst crypto bear market in memory is for all investment purposes surreal.
On similar lines as index funds, Bitwise, a prominent cryptocurrency index fund has filed with the SEC for their own ETF called Bitwise10 (Bitwise HOLD 10 Cryptocurrency Index Fund) comprised of top 10 largest cryptocurrencies by market capitalization (4).
So what’s next? With cryptos on course to solving far ranging real world problems, future growth in market cap is very much expected. Thus, it’s not a surprise many Wall Street pundits are paying attention and turning bullish for the prospects of cryptos (5). Lastly, and in-case already not clear, Ivy league Yale University, centre of education for many of the brightest minds has took part in already not one but at least two crypto funds beginning June of this year (6). The visionaries of our times are investing in the technology of the future. Don’t miss the future, stay tuned with The Future is Now!
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