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Coinbase Index Fund

blog.coinbase.com

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Re: Coinbase Index Fund

#161

Post by throwaway1748 »

ahtu123 wrote: post #81
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.

This "index fund" is made out of four currencies, BTC, ETH, LTC, BTC cash. Just buy a bunch of those and you're "investing" in their "index". Also you don't have to pay their fee for their immense expertise in putting this together.

I imagine fund investors will get instant exposure to any new crypto asset listed to coinbase or gdax. Which might be worth the price of admission alone if you think Coinbase listing an asset has the potential to drive the price up

Re: Coinbase Index Fund

#163

Post by hndamien »

techman9 wrote: post #150
bufferoverflow wrote: post #60

Earlier quoted context omitted.

This whole regulation is unneeded. You can bring your money to a casino and put it all on zero. Or buy a thousand lottery tickets. But investing in risky businesses needs to be walled off to the wealthy. What we really need is the real consequences for fraud / false financial claims.

You wildly overestimate how good most people are at evaluating risks. This isn't a couple hundred bucks over a weekend in vegas we're talking about, it's peoples' life savings or retirement accounts or childrens' college funds. If given the opportunity to invest in something with potentially extreme returns and poorly represented risks, many people will take it either because they don't understand the risk involved o…

You underestimate how much people plough into gambling, where the house will win if you play long enough.

Re: Coinbase Index Fund

#165

Post by proofofmoon »

slg wrote: post #133
froindt wrote: post #109

Earlier quoted context omitted.

I'm admittedly not up on rebalancing policies. With a fund of highly volatile assets, would rebalancing more frequently be necessary? I'm not thinking daily, but perhaps every month or so?

Yes, at the most general level highly volatile assets should be rebalanced more frequently. However, that isn't going to be a universal rule. It will depend on what is causing the volatility and whether that is more a product of the market or something specific related to the assets. Rebalancing too frequently is also a very real possibility so more is not always better. Another consideration specific to cryptocurren…

Rebalancing cryptoassets on the same exchange (without withdrawing to a wallet [1]) doesn't require on-chain transactions. The fee would be the order fill fee, which for GDAX is 0-0.25%, much less than 2% of the account balance.

([1] For the not-your-keys-not-your-coins crowd: if you don't trust Coinbase with the coins, you can't trust it with the fund either.)

Re: Coinbase Index Fund

#166

Post by comboy »

Wow, that doesn't seem wise (at the first glance). These market caps are really easy to manipulate, especially when you only have to do it annually and the exact time is specified. Huuge shorts. Bonus points for doing something like BCH before that to force your coin onto Coinbase (because otherwise people are gonna complain Coinbase is stealing their coins from the forked chain).

Re: Coinbase Index Fund

#167

Post by VLM »

paulgb wrote: post #30
machinecontrol wrote: post #24

Couldn't anyone just copy the composition of this fund and buy the same cryptos themselves without paying management fees or being locked in to Coinbase?

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)

You also have the job of figuring out how much you lose by not rebalancing and then figuring out the interval that maximizes total profit (oh and don't forget to include taxes in that calculation)

Re: Coinbase Index Fund

#168

Post by dmurray »

JumpCrisscross wrote: post #53
Klathmon wrote: post #33

Earlier quoted context omitted.

It's only "unknown" if you refuse to read. https://am.coinbase.com/documents/cbi-methodology.pdf Edit: sorry, this came across more aggressive than I meant for it to be!

Pardon me, the construction is as transparent as something like this can be, i.e. generally, whatever their committee feels like. My qualm is with the word “balancing” which implies diversification as this term is used within portfolio theory. You can’t balance a book of correlated assets. (You can track them, which this index tries to do.)

Rebalancing is the correct term of art here. The index reweights, the fund rebalances its holdings in order to track the new reweighted index. Source: traded a lot of index funds.

Also, based on the blog post, the fund (or the index managers, who are the same people here) would say they are rebalancing in your sense of the word too. They are adding diversification compared to a portfolio that just holds, say, bitcoin. Sure, it's not as diverse as one that also holds stocks and bonds and real estate, but nobody's perfect.

Re: Coinbase Index Fund

#169

Post by eftychis »

Reading the weighting section of the index fund ( https://am.coinbase.com/documents/cbi-methodology.pdf -- linked in a few sibling comments too) the following statement, while standard language and approach, makes me wonder in this case:

"The market capitalization of each constituent asset is calculated as the price of the asset multiplied by the supply of the asset."

There are always some small mistakes in the supply of the asset. Bitcoin however has a considerable amount of lost coins. This has been discussed a lot and there are a couple of studies out there (here is a quick link via fortune (placeholder till I find the original study): http://fortune.com/2017/11/25/lost-bitcoins/).

They seem to ignore this fact in their calculations (they follow a fixed supply approach it appears. Does anyone with experience in investing have any opinion? Shouldn't indexes at least attempt adjustment?

Note paragraph 2.10 mentions that no supply adjustment ever is going to be made. I think this considerably inflates the nominal value of the fund (for the eyes of the world). Thoughts?

Re: Coinbase Index Fund

#170

Post by solotronics »

rektlessness wrote: post #136
justinalanbass wrote: post #61

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, y…

I suggest those interested in Crypto Index Traded Funds to look into Crypto20. This fund provides a way to track the performance of the crypto markets as a whole by holding a single crypto asset. "Crypto20 is a tokenized, closed-end index fund (CEF) which passively tracks the top twenty cryptocurrency assets by market capitalisation. All profits are reinvested into the fund." Here is the link to the whitepaper for th…

his transparent is this fund?
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