The SPY Of Crypto? Coinbase Launches Cryptocurrency Index Fund

Coinbase dashed the hopes of thousands of ripple investors, who've been holding out hope that the exchange would add the coin, when it revealed that its "major announcement" Tuesday afternoon was, in fact, the introduction of the Coinbase Index Fund, a pioneering investing vehicle that just might do to cryptocurrencies what the ETFs like the SPY did for stocks. 

The company published the announcement on its blog:

We’re excited to announce Coinbase Index Fund.

Coinbase Index Fund will give investors exposure to all digital assets listed on Coinbase’s exchange, GDAX, weighted by market capitalization. If a new asset is listed on the exchange, it will be automatically added to the fund.

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. We’re excited to give our customers the ability to invest in the potential of blockchain-based digital assets as a whole.

Twitter users were unimpressed however because, as the company pointed out, Coinbase and associated exchange GDAX only lists four coins...

The news had some impact on the price of cryptocurrencies, which have been slumping Tuesday, with Ripple lower and the rest bouncing marginally higher...






The company didn't offer a date for the product launch, saying only that it would be available "very, very shortly." However, there's a catch: the fund will only be available to accredited investors based in the US. Over time, Coinbase hopes it can expand as regulators grow more comfortable with the product. The fund will be pegged to Coinbase's new Coinbase Index...


During an appearance on CNBC, Coinbase COO Asiff Hirji said crypto is "an asset class" and that "individual investors, they tend to trade in funds, and they tend to trade in index funds, passive investing. That's why we've created the index and we've created the index fund to enable that."

Importantly, the company also said it would add more coins to its platform as it vets them and there is more "regulatory certainty."

"We are committed to adding more assets to the exchange. If we add an asset to the exchange, it will show up in the fund. It will be market-cap weighted. We have a framework for how that works," Hirji said. "We’re trying to make this super simple," he added.

The fund is marketed toward an entry-point for folks who are new to digital tokens, or for those who want a passive investment, Coinbase product manager Reuben Bramanathan told Axios.

The fund also has a minimum investment of $10,000 and a flat 2% fee - though there are no performance fees.

As Axios points out, Bitwise Asset Management announced its own token-focused fund in December, raising funding from several big name VCs. Several smaller companies are also looking into building indexes and funds of their own. But Coinbase, which has more brokerage accounts than Charles Schwab thanks to last year's rally, has the clout to become a major player quickly.

Watch the full segment below:

Coinbase president announces index fund, initially for accredited investors from CNBC.