When building the long-term investment portfolio, cryptocurrency indices are a way to track the crypto price movements. In addition to tracking the direction of crypto markets, indices allow you to create index funds — investment portfolios based on several digital assets.
In this article, we will talk about investment funds and their benefits and go through the existing solutions available to investors in the market today.
Indices provide an opportunity to evaluate the market’s financial state and the prospects of growth or decline of an asset group by taking into account such data as market capitalization, market price, number of coins in circulation, daily trading volume, etc.
Indices are used to form index funds — ready-made investment portfolios, which allow high returns without the need to analyze each individual digital asset.
Automated index funds are services that undertake market analysis and data accounting. Such services are excellent for beginners and large investors for effective and profitable investment portfolio management.
There are many types of cryptocurrency funds. For example, depending on the method of management, they are divided into manual ones, where users can create and manage investment portfolios on their own, and automatic, in which the portfolio is assembled for the client, taking his expectations for profitability and forecasts into account.
Cryptocurrency index funds are used to diversify an investment portfolio, protecting investors from market volatility. Index funds allow for more predictable returns by reallocating assets and displaying returns. It is worth noting that index funds do not require in-depth knowledge of cryptocurrencies, which allows beginners and large investors to profit and protect their funds, saving time and effort.
HB10 is an investment product from the Huobi exchange based on an eponymous index they created, tracking the ten most popular assets paired with USDT. The HB10 index assets are ranked according to their liquidity, trading volume, and volatility. The HB10 Investment Fund allows users to access the digital asset market at a low cost.
HB10 allows retail and institutional investors to purchase different asset combinations, and the assets themselves are interchangeable with other cryptocurrencies in the fund. Blockchain-based assets that fall into one of four categories — coin, platform, app and real asset token — claim to be part of the index.
Investments are available in BTC, ETH, USDT, and Huobi tokens (HT). The exchange also charges fees, so when investing up to $500k, the commission equals0.1%.
Ember Fund is an investment fund with a clear and simple interface, available on mobile devices. Ember allows users to buy a diversified portfolio with the ability to manage their own funds. The peculiarity of the application is the fact that all data is encrypted on the user’s device, and no third parties have access to the user’s funds.
To register on the platform, you need to provide your email. Account replenishment can be done from external wallets or by connecting your Coinbase account. The platform contains portfolios of such assets as BTC, ETH, USDT, BNB, COMP, DASH, ENJ, LINK, XLM, XRP, and others.
There is no option to create your own investment portfolios on Ember, but a list of pre-made options is available. Portfolios differ in terms of market exposure and minimum funding threshold. Each asset is priced according to the market capitalization and updated daily, and different portfolios have a different composition of coins based on how “useful” they are. Portfolio value, ROI, and each asset’s detailed description are available to users.
Yearn Ecosystem Token Index — YETI
YETI is an index from PowerPool based on Yearn ecosystem tokens, which include: YFI, SUSHI, CREAM, AKRO, COVER, K3PR, CVP, and PICKLE. YETI allows users to access the Yearn ecosystem with a single token (YETI), vote for management proposals, and earn revenue based on Vault strategies applied to compound tokens. YETI holders have access to Yearn’s ecosystem tokens, receive additional revenue based on their use and a swap fee equal to 0.2% of the token swaps occurring in the YETI pool.
The YETI index focuses on tokens pooled in a single ecosystem. Also, YETI is an index product that offers portfolio diversification for users, with savings on gas costs. The index is fully community-driven, meaning users can change the set and distribution of tokens as well as the index fee, making it more flexible and adaptive to changes in the Yearn ecosystem.
YETI is a valuable solution for PowerPool users and the CVP community due to meta-management and internal product management. PowerPool indices also charge entry, exit, and swap fees to their users. These funds are used to reward active CVP token holders.
The Cryptoindex fund operates based on an index of 100 cryptocurrencies, which is available in financial terminals such as Bloomberg, Reuters, and TradingView. The coins tracked by the index have been selected using the AI algorithm, the Cryptoindex Zorex neural network, which analyzes over 3,000 assets based on more than 200 different parameters and does not include those assets whose value has been artificially inflated.
Cryptoindex investment fund allows investors to create portfolios on their own with rebalancing once a month, and the ERC-20 token CIX100 is available on the platform to represent portfolio assets of the CIX100 index fund.
Shrimpy is a trading bot and application for creating and managing investment portfolios, which allows users to create their own indices based on various parameters of the selected assets through the Shrimpy Index Tool. The possibility of buying any number of assets with different asset allocation options makes the platform more flexible and versatile for investors and traders.
Shrimpy is integrated with stock exchanges via API keys and allows to set the time of portfolio rebalancing, which will act as the base for the deals and portfolio management. Transactions are automated through exchanges with the help of trading bots.
The functions of automatic trading, rebalancing, and indexing are available in the free version of the application. A wider range of features, in the form of a social trading platform for communicating and sharing experience, displaying other users’ portfolios, and portfolio and strategy testing tools are available in the paid version.
CF Benchmarks’ Ultra Cap 5
The CF Cryptocurrency Ultra Cap 5 (CFUC5) is an investable benchmark index tracking the performance of a free-float market capitalization-weighted portfolio of the five largest cryptocurrencies by market capitalization. The Ultra Cap 5 Index by CF Benchmarks’ cryptocurrency index provider includes BTC, ETH, LTC, XRP, and LINK as the replacement for BCH.
The CF Ultra Cap 5 Index can be the basis for an ETF or a passive investment fund. CF Benchmarks indices are the new standards for price integrity and provide tools to create regulated asset management with increased transparency and reliability.
Some other CF Benchmark indices include XBT-USD, ETH-USD, LTC-USD, BCH-USD, EOS-USD, XTZ-USD, XLM-USD.
The formation of new financial instruments and the development of solutions for investing in the cryptocurrency space seek to capitalize on digital assets’ growing ecosystem.
Cryptocurrency investment funds make it easier for investors and traders from traditional financial spaces to access hedging and earning tools in cryptocurrency markets. The emergence of investment funds has increased the number of strategies for earning and provided the opportunity to create their own indices, strategies, and portfolios.
The cryptocurrency sphere is exposed to high risks due to intense volatility and lack of regulation. For this reason, index funds are more attractive for those users who are not prone to high risks.
Disclaimer: The contents of this article are not intended to be financial advice and should not be treated as such. 3commas and its authors do not take any responsibility for your profits or losses after you read this article. The article has been presented to provide readers with general information. There is only personal experience described herein. The user must do their own independent research to make informed decisions regarding their crypto investments.