7 Best Crypto Index Funds To Invest in 2023. | Credit: Shutterstock
Disclaimer: Investing in cryptocurrencies carries significant risk. Values are highly volatile. Never invest more than you can afford to lose. This site does not provide financial advice. Act based on your own research and consult with a financial professional before making decisions. Don’t invest unless you’re prepared to lose all the money you invest.
Key Takeaways
- Grayscale Bitcoin Trust (GBTC) offers indirect exposure to Bitcoin’s price movements, acting as an investment vehicle without holding the underlying cryptocurrency.
- Nasdaq Crypto Index Fund (NCI) provides diversified exposure to the cryptocurrency market, investing in ten cryptocurrencies, with Bitcoin and Ethereum being the major holdings.
- Galaxy Crypto Index Fund (GCIF) is managed by Galaxy Digital and leverages Bloomberg’s expertise, offering a diverse range of cryptocurrencies.
- Bitwise DeFi Crypto Index Fund (BITW) targets the rapidly growing decentralized finance (DeFi) sector, offering investors a diversified basket of DeFi-related digital assets.
Grayscale Bitcoin Trust (GBTC)
Overview
GBTC allows investors to gain exposure to Bitcoin’s (BTC) price movements without directly owning or managing the underlying cryptocurrency. GBTC is not an ETF or a mutual fund but is traded “over-the-counter” (OTC) like a traditional stock.
Investment Strategy And Objectives
Grayscale Bitcoin Trust aims to track Bitcoin’s price through fixed shares, each representing a fraction of Bitcoin, following a buy-and-hold strategy.
Composition Of Cryptocurrencies Included
As a single-asset investment product, GBTC does not provide exposure to a diversified pool of cryptocurrencies; it is solely focused on tracking the price of Bitcoin.
Fund Management And Professional Expertise
Grayscale Investments is the fund manager and sponsor of the Grayscale Bitcoin Trust. The company is one of the leading digital asset management firms in the cryptocurrency space.
Nasdaq Crypto Index Fund (NCI)
Overview
The NCI is designed to provide investors exposure to a diversified pool of digital assets in the cryptocurrency market. NCI invests its assets in the Hashdex Nasdaq Crypto Index ETF.
Investment Strategy And Objectives
As an index fund, NCI follows a passive investment strategy, aiming to replicate the performance of its index rather than attempting to outperform it actively.
Composition Of Cryptocurrencies Included
The NCI currently has ten cryptocurrencies. The portfolio composition includes Bitcoin with an allocation at 69%, Ethereum (ETH) at 28%, and Litecoin (LTC) at 1%. Other cryptocurrencies like Chainlink (LINK), Polkadot (DOT), Uniswap (UNI), and more have smaller allocations.
Fund Management And Professional Expertise
The Nasdaq Crypto Index Fund is managed in partnership with Hashdex, a Brazilian asset manager. Nasdaq is a well-established financial exchange and technology company, known for its indices and data products, making it a reputable partner in the cryptocurrency market space.
Fidelity Crypto Industry and Digital Payments Index (FDIG)
Overview
It is part of Fidelity’s exchange-traded funds focused on cryptocurrency and digital payments trends.
Investment Strategy And Objectives
The FDIG invests 80% of its assets in equity securities with the index reflecting the performance of global companies engaged in activities related to cryptocurrency, blockchain technology, and digital payments processing.
Composition Of Cryptocurrencies Included In The Index
The specific cryptocurrencies included in the FDIG have not been disclosed.
Fund Management And Professional Expertise
As a well-established financial institution, Fidelity brings its expertise and reputation to the management of the fund.
Galaxy Crypto Index Fund
Overview
The GCIF is an investment product involved in the cryptocurrency asset class, including digital stores of value, Web3, decentralized finance, and digital payments use cases.
Investment Strategy And Objectives
The primary objective of GCIF is to mirror the performance of the Bloomberg Galaxy Crypto Index (BGCI) . GCIF consists of a portfolio of digital assets.
Composition Of Cryptocurrencies Included In The Index
The specific digital assets included in the Bloomberg Galaxy Crypto Index (BGCI) include Bitcoin, Ethereum, Monero (XMR), Ripple (XRP), and Zcash (ZEC). The index diversifies into a range of categories spanning stores of value, mediums of exchange, smart contract protocols, and privacy assets.
Fund Management And Professional Expertise
The GCIF is managed by Galaxy Digital , a prominent player in the cryptocurrency space. The fund leverages Bloomberg’s strength in data, pricing, analytics, distribution, and research to ensure pricing transparency and quality in its portfolio constituents.
Bitwise DeFi Crypto Index Fund
Overview
The BITW focuses on decentralized finance (DeFi) cryptocurrencies. The fund provides investors with exposure to a rapidly growing DeFi sector within the cryptocurrency market.
Investment Strategy And Objectives
The fund is structured to be a statutory trust incorporated in the US, and designed to offer investors a convenient way to invest in a diversified basket of DeFi-related digital assets, potentially reducing individual token risk through diversification.
Composition Of Cryptocurrencies Included In The Index
Bitwise launched the DeFi index fund centered around DeFi holdings and within its index fund includes Aave (AAVE), Uniswap (UNI) (25%), Maker (MKR), Synthetix SNX (10%).
Fund Management And Professional Expertise
Bitwise is known for their expertise in creating crypto index funds, including the largest crypto index fund, the Bitwise 10 Crypto Index Fund.
Bitwise 10 Crypto Index Fund (BITW)
Overview
The BITW fund holds exposure to the top 10 cryptocurrencies by market capitalization.
Investment Strategy And Objectives
The primary objective is to replicate the performance of its underlying index, composed of the top 10 cryptocurrencies.
Composition Of The Top 10 Cryptocurrencies
The specific composition of the BITW is weighted by market cap and includes 70% of the crypto market. As of August, 2022, Bitcoin holds 63%, Ethereum 28%, and the other tokens including Cardano (ADA), Solana (SOL), Polkadot (DOT), Polygon (MATIC), Litecoin (LTC), Chainlink (LINK), Uniswap (UNI) and Avalanche (AVEX) with smaller percentages.
Fund Management And Expertise
Managed by Bitwise Asset Management, a well-known crypto asset manager with experience in creating crypto index funds. Bitwise is also the creator of the Bitwise Crypto Industry Innovators ETF (BITQ).
eToro Smart Portfolios
Overview
Smart Portfolios, crafted by eToro analysts, offer diverse investment strategies for major market trends. They are longer-term investment portfolios and come with no portfolio management fees.
Investment Strategy And Objectives
eToro offers a selection of 14 specialized Smart Portfolios that exclusively focus on cryptocurrencies, providing investors with smart exposure to the crypto market. Each portfolio comes with unique strategies and objectives, especially regarding asset weighting.
Composition Of The Top 10 Cryptocurrencies
Some top DeFi tokens include lido staked ether (SETH), representing Ethereum staked within the Lido staking protocol, DAI (a USD-pegged stablecoin by MakerDAO), UNI (the native token of UniSwap decentralized exchange), and Chainlink’s LINK, the token of the Chainlink decentralized oracle network.
Fund Management And Expertise
eToro’s Smart Portfolios are professionally managed by its team of analysts, leveraging cutting-edge technology and advanced data. The portfolios are periodically rebalanced to optimize their performance based on trading strategies.
Conclusion
In conclusion, the world of cryptocurrency is constantly innovating, offering investors diverse opportunities for exposure to digital assets. The Grayscale Bitcoin Trust focuses on Bitcoin’s price movements, while the Nasdaq Crypto Index Fund provides diversified exposure to various cryptocurrencies.
Additionally, eToro’s Smart Portfolios offer investors a range of strategies to tap into major market trends. As the crypto market evolves, these investment options continue to adapt and provide innovative ways for investors to participate in the digital asset space.
FAQs
What are crypto funds, and how do they differ from individual cryptocurrencies?
Crypto funds are investment vehicles that pool investors’ money to invest in a diversified portfolio of cryptocurrencies.
What should I consider before investing in a crypto fund?
Before investing in a crypto fund, consider factors such as the fund’s investment strategy, management expertise, track record, and fees.
Are crypto funds regulated, and how can I verify their legitimacy?
Crypto funds may not be subject to the same level of regulation as traditional financial products. It’s crucial to conduct thorough research and verify the legitimacy of the fund and its management team. Check for proper licensing, registration, and reviews from reputable sources before making any investment decisions.
What are the potential benefits and risks of investing in crypto funds?
Investing in crypto funds can bring risk, through market volatility, regulatory changes, technological vulnerabilities, and hence a potential loss of capital. It’s advisable to consult with a financial advisor and only invest what you can afford to lose.
