Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Coinbase Index Fund

blog.coinbase.com

Post reply on HN
Print view View original

221–230 of 346 posts

Re: Coinbase Index Fund

#221

Post by mlerner »

zone411 wrote: post #73
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…

Why was there enormous work involved? Were you rebalancing very often? Note that Coinbase's fund will be made up of only four cryptocurrencies, not 25 like yours.

The Bitwise HOLD10 (where I work) handles a lot of the hard work around rebalancing and taxes.

Re: Coinbase Index Fund

#222

Post by mlerner »

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…

Bitwise Investments has a fund (the HOLD10 Index: https://www.bitwiseinvestments.com/) that handles a lot of the hard work around rebalancing/taxes/security. We are currently only open to accredited investors to, but have plans to open up more widely.

Re: Coinbase Index Fund

#223

Post by b4lancesh33t »

mifeng wrote: post #208
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…

If you want to buy this Coinbase index fund, just do this: 1. Log into Coinbase 2. Buy [BTC, ETH, BCC, LTC] with [62%, 27%, 7%, 4%] weights 3. Check back in one year and rebalance That's it! As an added bonus, you just avoided 2% fees and can "redeem" anytime.

I'm not sure this is such good advice. It means you're guaranteed to miss out on high appreciation of anything but the largest coins. That's all well and good for a less volatile scenario like the stock market where the top20 is pretty well correlated with the top2000. But given the volatility of digital assets, i would worry that this strategy leaves more on the table.

Re: Coinbase Index Fund

#224

Post by homero »

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…

How's $6700 relevant?

Re: Coinbase Index Fund

#225

Post by patmcc »

derefr wrote: post #144
patmcc wrote: post #134

Earlier quoted context omitted.

>>For the same reason that, say, transferring your wealth from an Irish bank account to a German bank account doesn’t trigger a capital-gains event in the US? If there's a currency change, it absolutely does trigger a capital-gains event, unless you have a truly terrible accountant. Just like when any other asset is disposed of, the value is calculated at that point. If you move USD from one bank to another that's di…

I think you're talking about currency changes that happen by moving around within US banks, or by moving money between countries where one of those countries is the US or has a specific treaty supporting US foreign taxation. If it wasn't possible for a US entity to move money between (at least a few) countries that aren't the US without paying US capital-gains, US corporations wouldn't love holding money in Ireland n…

Two things on that: first, moving money between banks but in a single currency wouldn't generate a taxable event - there's no possibility of profit or loss like there is with a currency exchange (i.e. you're not buying euros and then selling them, you're just moving dollars). Second, all the Irish and Dutch craziness relies on multiple corporations (all owned by the parent, of course), which complicates the tax situation a bunch.

Re: Coinbase Index Fund

#226

Post by zerocrates »

homero wrote: post #224
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…

How's $6700 relevant?

NEO's current price is ~ $108, so I believe the parent post is saying that NEO represents somewhere around 1.6% of the market cap of top 25. Since you must buy at least 1.0 NEO, if you want to balance things out just right, you'd need to have a total investment of at least $6700.

Anything less and you either have to leave NEO out entirely or you have to still have the minimum of 1, which will be a larger share of your holdings than its relative market cap.

Re: Coinbase Index Fund

#227

Post by mlerner »

zone411 wrote: post #73
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…

Why was there enormous work involved? Were you rebalancing very often? Note that Coinbase's fund will be made up of only four cryptocurrencies, not 25 like yours.

I think rebalancing with Coinbase's selection of coins is pretty easy. When you have a more complex basket (for context, I work at Bitwise Investments, which runs the Bitwise HOLD10 Index), it is more difficult to decide what goes into the basket.

For example, several coins (like Neo and Ripple) have supplies that grow and are centrally controlled, but many coins have planned inflation schedules. We know that the supply of many of the large-cap coins is going to grow over the next couple of years, and that needs to be taken into consideration when valuing them.

To explain why that is important: if people buy a coin at a certain price _knowing_ that a certain amount of inflation is going to happen, that means investors think that the market cap of the coin is actually much more (think of this like Discounted Cash Flow). Restated, if people buy these coins knowing that the supply is actually going up, that means that they think that the value of the coin is actually much higher than the current market cap.

If you want to learn more about indexing methodologies for cryptocurrencies, you should check out our website: https://www.bitwiseinvestments.com/index

Re: Coinbase Index Fund

#228

Post by JumpCrisscross »

logicallee wrote: post #126
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…

>since they [Coinbase] are not a neutral player Why do you say this? (The part I added in bracket part is unambiguous in your sentence.) Coinbase doesn't have its own coin, for example. (That is the main thing that I would think would make someone "not neutral".) Can you explain your thinking, or tell me what facts I'm missing?

The people choosing which coins to include and how to weight them have tremendous power. They, and their buddies, will be tempted to (a) re-constitute the index to favour assets they own or (b) buy and sell ahead of re-constitution using insider information. “Painting the tape” is a problem with proper indices; here, someone on the GDAX side could conceivably just mess with the records.

Re: Coinbase Index Fund

#229

Post by [deleted] »

bufferoverflow wrote: post #60
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 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.

[deleted]

Re: Coinbase Index Fund

#230

Post by debt »

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?

No, because that's not how an index works.

"The index level for CBI is calculated by dividing the sum of the current USD market capitalizations of all constituent assets by the Divisor and multiplying the result by 100."

In particular the reconstitution variable:

"CBI will be reconstituted each time that a new asset is listed on GDAX, in order to allocate the correct weight to each constituent asset and to prevent an artificial increase in the index level. Each reconstitution will occur at 5pm Pacific Time on the fifth day that the new asset is traded on GDAX. This is designed to reduce the effect of any temporary price volatility in the new asset in the first few trading days after its listing."

Post reply on HN