Coinbase Index Fund • Hacker News Board

Re: Coinbase Index Fund

#61

Post by justinalanbass » Tue, Mar 06, 2018, 11:38 PM UTC

I have attempted to duplicate this index fund manually by purchasing the top 25 cryptocurrencies (market-cap weighted) over the past year or so. I'll say that it was hardly worth the enormous work involved, and these index funds cannot come soon enough to non-accredited investors. In some cases it's not possible to do perfectly alone: NEO has a minimum unit of 1 coin, and so if you wanted it to not be overweighted, you'd need to have a total portfolio that is an integer multiple of $6700 right now.

However, I would not buy this fund from Coinbase since they are not a neutral player, and the market is not regulated yet. There are still great advantages in owning coins yourself - I expect that, as an average investor, I will certainly be prone to manipulation in some way. Alas, the greatest gains are probably long-since gone. No risk, no reward.

Re: Coinbase Index Fund

#62

Post by asdsa5325 » Tue, Mar 06, 2018, 11:39 PM UTC

userhacker wrote: post #35

Meekro wrote: post #14

Earlier quoted context omitted.

If you bought the 4 currencies yourself, you'd have to pay capital gains taxes each time you rebalance.

unless you change your holdings into fiat thats not the case. You can rebalance with exchanging among your coins

Actually not true. You have to pay gains from coin to coin transactions. For example, let's say you buy 1 BTC with $10k. Then you turn the 1 BTC into 10 ETH. Then, later you convert 10 ETH into 1.2 BTC after the conversion rate between the two changes. At that point you have to pay capital gain on the dollar amount of 0.2 BTC, even if you don't convert any BTC back into USD.

Re: Coinbase Index Fund

#63

Post by zone411 » Tue, Mar 06, 2018, 11:39 PM UTC

JumpCrisscross wrote: post #27

charlesdm wrote: post #21

Earlier quoted context omitted.

You do know there are hedge funds out there charging 2% on AuM + 20% of profit (or higher) to access crypto, right?

> there are hedge funds out there charging 2% on AuM + 20% of profit (or higher) For alpha, or the attempted pursuit of it (or a specific risk-return and liquidity profile). The point of index funds is their lower cost.

Exactly, the comparison to hedge funds is not valid. Vanguard S&P 500 ETF has an expense ratio of 0.04%.

Re: Coinbase Index Fund

#64

Post by hexane360 » Tue, Mar 06, 2018, 11:39 PM UTC

ttoinou wrote: post #55

From this post : Coinbase Index is a measure of the financial performance of all assets listed on GDAX, weighted by their market capitalization. Methodology : https://am.coinbase.com/documents/cbi-methodology.pdf The index level for CBI is calculated by dividing the sum of the current USD market capitalizations of all constituent assets by the Divisor I don't see how anything is weighted, it's just the sum of capital…

That's automatically weighted by their market capitalization. Capitalization in USD = price (USD/coin) * capitalization in coins

Re: Coinbase Index Fund

#65

Post by dingdongding » Tue, Mar 06, 2018, 11:40 PM UTC

sagivo wrote: post #15

I don't see the value here. I can simply buy it on Gdax weighted by market capitalization and save the 2% annual management fees.

In future hopefully this index will become more complicated once GDAX supports more cryptocurrencies

Re: Coinbase Index Fund

#66

Post by jacques_chester » Tue, Mar 06, 2018, 11:40 PM UTC

asdsa5325 wrote: post #56

charlesdm wrote: post #9

Earlier quoted context omitted.

You forget it's automated. I think plenty of HNWIs are willing to pay 2% management fee to be able to invest in a diversified crypto index fund.

2% fee is pretty high, I don't think so.

Cryptocurrencies have characteristics of other high-risk assets -- diamond mines in war-torn regions, shares in politically unstable countries, bonds of provinces or states with a history of defaulting, venture capital, exotic commodities trading etc etc.

The risk is higher, the volatility is higher, liquidity is lower, the overall market is at an early stage of development.

For such asset classes, paying a fat premium is common.

Re: Coinbase Index Fund

#67

Post by Dramatize » Tue, Mar 06, 2018, 11:40 PM UTC

sagivo wrote: post #15

I don't see the value here. I can simply buy it on Gdax weighted by market capitalization and save the 2% annual management fees.

You're not their target customer.

Re: Coinbase Index Fund

#68

Post by ericmcer » Tue, Mar 06, 2018, 11:40 PM UTC

aneesh wrote: post #8

That chart is log-scale. The index fell by more than half between December and February, but you wouldn't know it by glancing at the chart.

Good eye, that is sketchy. The entire industry seems to be floating on FOMO right now though, so it definitely serves that purpose.

Re: Coinbase Index Fund

#69

Post by hmate9 » Tue, Mar 06, 2018, 11:41 PM UTC

tyrust wrote: post #47

paulgb wrote: post #30

Earlier quoted context omitted.

The transaction costs would probably add up to more than 2% depending on how accurately you wanted to track the index, plus it sounds like a bunch of work. (Edit: I'm not saying it's actually worth 2%, which seems excessive)

With a 0% maker and [0] - https://www.gdax.com/fees/BTC-USD

Taker fee is 0.25%

Re: Coinbase Index Fund

#70

Post by icedchai » Tue, Mar 06, 2018, 11:42 PM UTC

AndrewGaspar wrote: post #25

"Available to US accredited investors." It seems a little ironic that any Joe Blow with a credit card can buy cryptocurrency, at presumably higher risk since he's managing the assets himself, but he can't invest in this fund.

He can, he just has to check a box and lie. Maybe he was an accredited yesterday, but today he isn't. Who's to say. And the truth is, nobody checks.