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Coinbase Index Fund

blog.coinbase.com

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Re: Coinbase Index Fund

#281

Post by [deleted] »

cies wrote: post #122
slg wrote: post #82

Earlier quoted context omitted.

Yeah, this is an index of 4 securities and is rebalanced annually. Coinbase is charging a 2% fee for what amounts to automating a max of 4 transactions a year. I get that people are excited about cryptocurrencies becoming available in more traditional investment vehicles, but this particular index fund seems almost completely unnecessary.

> Coinbase is charging a 2% fee for what amounts to automating a max of 4 transactions a year. I came up with some more they do for 2%/y: * Buy more coins when their fund expands * Secure the shit out of those private keys

[deleted]

Re: Coinbase Index Fund

#282

Post by DennisP »

vkou wrote: post #145
cies wrote: post #122

Earlier quoted context omitted.

> Coinbase is charging a 2% fee for what amounts to automating a max of 4 transactions a year. I came up with some more they do for 2%/y: * Buy more coins when their fund expands * Secure the shit out of those private keys

* Secure the shit out of those private keys Are they insured for 100% of the value of the coins on those private keys? If not, you are paying 2% YoY + X%, where X% is your counterparty risk - the odds that someone at Coinbase fucks up, and your money is irreversibly gone.

That's a good question. If the answer is "yes" then maybe that's the reason for the high fee.

Currently they have insurance on their hot wallet coins, which I think is about 5% of the total. The cold wallets aren't insured, but they're paper wallets held in safe deposit boxes all over the world, so it's unlikely that a large percentage would be lost.

Re: Coinbase Index Fund

#283

Post by philipodonnell »

evrydayhustling wrote: post #211
Meekro wrote: post #103

For anyone wondering why this is better than just buying the coins yourself, here are some reasons: 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 wan…

Disagree with all 4 of these: 1) They are publishing which coins are held by the index, so the choice of coins is being given away for free, not just to investors. 2) Coinbase's main product is a SaaS account that lets you buy the same coins without knowing how to manage a wallet - so you can implement the index and skip the management fee using an account with them. 3) Controlling administrative access to an account…

> 4) Funds have to pass through taxable events to customer (other than some structures which must pay the tax themselves) -- the taxation doesn't disappear because it's wrapped by another entity. Plus, the prospectus shows that the Coinbase fund will only need to rebalance once a year when it recalculates available supply on Jan 1.

Doesn't that depend on the structure? Mutual Funds pass taxable events but I don't believe Index Funds/ETFs do, since there is an incorporated entity that you own shares in that is making the trades and paying the taxes.

Re: Coinbase Index Fund

#284

Post by tomp »

dudus wrote: post #88
tomp wrote: post #20

Earlier quoted context omitted.

> transaction costs in cryptocurrencies tend to be high by financial standards Well if you own the exchange the effective transaction costs are 0.

There are transaction costs for exchanges but there are also transaction costs for miners. Coinbase I think just lumps these into a single number, but other places you can choose the amount that goes to miners, on the risk of taking longer to confirm your transaction if you pledge a low amount.

> transaction costs for miners

So? We're talking about an index by an exchange. I seriously doubt it that they'd actually transact on the blockchain; and if they would, that's just plain stupid, because it only increases costs without any benefit for the investors (who still don't actually own their coins).

Re: Coinbase Index Fund

#285

Post by philipodonnell »

Great to see innovation in the crypto-index space, but as others point out 2% is way overpriced for some administrative efficiencies and a once a year rebalancing. This is a very 'classic' approach to the diversification problem, but as an alternative financial system we should see crypto-focused solutions that move past this.

I'm working with a group of folks on a version of this that re-balances in real-time on GDAX with immediate withdrawls, no pass-thru tax burden, and low monthly fees. If anyone is interested in participating or learning more reach out to me via email to philip at postral dot com.

Re: Coinbase Index Fund

#286

Post by DennisP »

habosa wrote: post #51

Kind of sad when a major player likes Coinbase invites the pure speculators in. Yes I know that 99% of people were just speculating before but at least they had the possibility of transferring their crypto assets off the exchange and using them for something. Now it's just some magic number you can root for. It's no more interesting or decentralized than any other financial instrument. When you think about it, crypto…

Part of the problem is that if you buy a coffee with cryptocurrency, the IRS wants you to pay capital gains on that transaction. Personally I've avoided actually using crypto because I don't want the hassle.

Germany recently passed a law that excludes small crypto transactions from tax reporting. The U.S. already has this for foreign currencies.

Re: Coinbase Index Fund

#287

Post by cocktailpeanuts »

bloak wrote: post #262
cocktailpeanuts wrote: post #130

Earlier quoted context omitted.

There is no communist country in the world right now...

Was there ever? The Warsaw Pact countries had "communist" parties, but the country itself was usually called "socialist", and the propaganda tended to refer to "building socialism", as if they hadn't even finished socialism yet, let alone communism. So "communism" seemed to be a sort of nirvana that people were supposed to eternally strive towards rather than something that they could claim with a straight face they…

As we agree, there has never been a pure communist country. When I mention communist country, I'm talking about this hypothetical communist country. If such an economy did successfully exist, the concept of "money" will be very different in their world.

I used this as an analogy to explain how the concept of cryptocurrency is very different from the gold standard or fiat based money we've been accustomed to.

A lot of people think of cryptocurrency as just another speculative investment asset like stocks, but that's the stupidest thing anyone can do, because unlike stock market which exists on top of capitalist economy, backed by government's legal system, cryptocurrency is a whole new world.

In fact, the whole point of cryptocurrency is that it's "trustless"--if you lose your money to a scammer, no government will help you, it's your fault for being an idiot.

Cryptocurrency and stocks look the same to most people because all they see is a way to get richer, but most of them don't realize they're jumping onto a completely different economy.

This is why I think index funds are meaningless. Index funds in traditional economy can never go to zero because governments will bail them out. Cryptocurrencies in my opinion have a good chance of going to zero (and this is coming from a cryptocurrency believer). And when it does go to zero, there is no government to bail anyone out, and coinbase won't help you either, they'll just move on.

Re: Coinbase Index Fund

#288

Post by moduspol »

slg wrote: post #82
zone411 wrote: post #73

Earlier quoted context omitted.

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.

Yeah, this is an index of 4 securities and is rebalanced annually. Coinbase is charging a 2% fee for what amounts to automating a max of 4 transactions a year. I get that people are excited about cryptocurrencies becoming available in more traditional investment vehicles, but this particular index fund seems almost completely unnecessary.

But they can't necessarily make those transactions easily with a ton of money in the fund, right?

I mean if the current price of BTC is $10,500, buying $10m worth of BTC will drive up the price as they're doing it. So how can you rebalance accurately if you're affecting the price of these cryptocurrencies while you do it?

Or do they just do like a "best guess" and overbuy a little and then sell off to get the balance right? I guess any index fund would have this issue, though.

Re: Coinbase Index Fund

#289

Post by philipodonnell »

pimmen wrote: post #269

If cryptocurrencies are the currencies of the future and they're not just an investment product for people who want to get rich on hype, prove it to me very simply; spend your cryptocurrency. Really, it's that simple; use all of them to buy something disposable, or even invest them if you want, but if you can't bear the thought of being separated from them for something else then I just don't see how their deflationa…

You are right to be suspicious, but there are a wide variety of cryptocurrencies, some of which are designed to be a medium of exchange between valuable goods and services and some of which are designed for very different purposes. Not all are deflationary. Some are supposed to be the valuable good itself (as a proxy for some physical asset).

Re: Coinbase Index Fund

#290

Post by supermdguy »

tyrust wrote: post #39
supermdguy wrote: post #32

Earlier quoted context omitted.

Yes, but it would take a lot of work, and would need to be updated whenever market share for a coin changes.

The index currently contains 4 coins. Quarterly (or monthly if you really would like) balancing of 4 assets would not be that difficult.

Wow, I didn't realize it was only 4 coins. It'd definitely be much easier and cheaper to do this yourself.
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