Coinbase Index Fund

Like others, we've tried to maintain our own index of top cryptocurrencies, and experienced all the same repetitive issues of calculating asset shares, etc.

So we created a tool to help ourselves, and hopefully others: https://thecoindexer.com. It takes an input portfolio (on CoinFYI or others) and periodically calculates and emails the optimal* rebalancing trades to match a target index. Current indexes are based off CoinMarketCap's top 5, 10 and 25 assets.

We've still got a lot of kinks to work out, but feedback/suggestions are welcome.

*optimal = fewest # of trades on preferred exchanges

1. Non-technical investors don't know which coins to buy. There are some genuinely good coins, and lots of scams, and they look pretty much identical to the untrained eye.

2. Non-technical investors don't know how to store coins safely. Words like "cold wallet" and "Trezor" don't mean anything to them. Even if they wanted to learn, it's hard to separate useful information apart from scams. There was a guy a while ago who bought a hardware wallet on ebay and lost all his coins. Even smart people sometimes do dumb things, and in this case it could cost them everything.

3. Investment firms with more than 1 person involved have additional challenges. Who gets the coinbase login? Who gets access to the safe deposit box where the private keys are held? If only one partner has access, he might steal the coins and say "we got hacked" and no one can prove otherwise. Or he might get hit by a bus, and then no one else can get the coins out. If multiple partners have access, one of them might screw the others and steal the money and there's no way to know who did it. Crypto nerds will say "use multi-sig wallets," but that's way too complicated for most people. Screw-ups when creating a multi-sig wallet could render your coins unspendable.

4. If you make a crypto portfolio (as opposed to just holding bitcoin), you'll trigger a capital gains event each time you rebalance. Many people don't seem to realize that crypto-to-crypto trades are still taxable, but it's true. If you want to rebalance more than once per year, it becomes short-term capital gains and your tax rate goes way up.

The problem with back-end enforcement (and those laws do exist) is that it doesn't remove the incentive to try issuing a scam-ish security and hope you will evade prosecution, and the damage done can take years to unwind, if it's even possible at all. This is why there are regulations on public offerings of securities to non-accredited investors.