Is There An Index Fund For The Cryptocurrency Market?

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  • December 25, 2020
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Some pointers before investing in such

The cryptocurrency industry is so promising that it has become so attractive not only to crypto believers but lately also to institutional investors. And even those who do not understand yet the nature and characteristics of the cryptocurrency market would also like to engage in it. Now, there is a path of least resistance for beginners and new believers alike: index funds.

Index funds are generating a new kind of interest among traditional investors who are more into stocks and would rather have their funds managed by competent service experts. Still, other investment enthusiasts will try their hand designing their personal index according to prevailing market sentiments. A portfolio of indices can protect funds from unpredictable price fluctuations the digital market is known for and adjusting risk exposure based on algorithmic market tracking devices.

The Workings of a Cryptocurrency Index Fund


Just as an index fund is a basket of stocks and bonds in a financial market index, so is a cryptocurrency index fund where you buy shares in the fund instead of directly purchasing coins and other digital assets. Fund managers will take charge of investing based on their expertise in the industry on various cryptocurrencies called for by the index. This type of diversified investment works better against potential risks posed by a volatile crypto market than doing it yourself on individual coins. Another upside is that you free yourself from the unnecessary stress of self-managing your coins by setting up wallets, risks and returns calculation, whereas the index fund tracks daily coin performance, price, and choice of coins based on capitalization. Investing in an index fund works better for long-term-minded investors with passive investment preferences.


Opting for an index fund to invest your money can be costly as fund management fees run from 2.5% per annum up. You may stop short of investing since entry fees can be expensive as index fund entities require a substantial amount of minimum investment before joining. Some are as high as $250,000 to $20,000,000 upon entry. One more thing is that you cannot expect to be rich overnight since index funds produce small ROIs on short time windows. It is really designed for the long haul.


CoinMarketCap reports that as of September 2020, there are 2,955 cryptocurrencies in the market with a total market cap of $324.716 billion. Coinlore lists a different count with 4,621 cryptocurrencies. We can safely assume that 5,000 cryptocurrencies float in the market today., and there is no telling which is which in making a good investment. Only thing is, high-risk investments usually generate high-value ROIs. Individual investing may divest you of more than you can afford. That is why index fund allows you to play safer on unknown and volatile grounds with better predictability than building your own crypto portfolio from nothing. Bitwise Asset Management is the first cryptocurrency index fund and follows the top 10 coins. Coinbase Index follows seven choice cryptocurrencies in their index fund. Still, it is good to do basic research among exchanges that offer index fund products so you can maximize your value and reach your financial goals.

eQapital is relevant now more than ever in catering to the present needs of the digital investor. Financial services from Trust, Custody, Exchange, Transfer, to Asset Management needs are strategized on blockchain to empower you to control your funds, whether fiat or crypto. Security is in place with AML/KYC/CFT procedures. Our friendly eQapital Team is always ready to assist you 24/7. Give us a call now and let us be partners towards your progressive financial health goals.

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