Coinbase Launches Cryptocurrency Index Fund, and Yes, You Can Invest with Bitcoin


Coinbase to Launch Cryptocurrency Index Fund

Coinbase President and COO Asiff Hirji announced the new product on Tuesday during an appearance on CNBC's «Fast Money»

Hirji said that the Coinbase Index Fund — which will initially only be available to accredited investors — will hold marketplace cap-weighted positions in the four cryptocurrencies currently listed on GDAX, the company's order-book market — as well as any cryptoassets that are added to the platform in the future.

It follows that, when it opens, Coinbase's cryptocurrency index fund will hold places in Bitcoin, Ethereum, Bitcoin Cash, and Litecoin.

«I think that the investors are not going to want to pick certain winners or losers,» Hirji said of the he expects will be drawn to the fund.

Notably, both Hirji and Reuben Bramanathan — the product lead for the new index fund — stated that the company's «first priority» is currently jumping through the regulatory hoops necessary to create the fund (and others it hopes to launch later on) available to retail investors.

«We're expecting huge demand from retail when that's available, and we would like to be in a position to accept that demand,» Bramanathan told Fortune.

At first blush, the Coinbase Index Fund seems like Grayscale Investments' recently-opened Digital Large Cap Fund, which holds weighted positions in the five largest cryptocurrencies by market cap. There are differences that are subtle.

At present, the two funds endure. Grayscale's fund comprises Ripple's XRP token, which isn't currently listed on GDAX. Coinbase has also said that it plans to expand its list of supported cryptoassets significantly in the future, meaning that its fund will probably provide investors with exposure to a greater array of assets than Grayscale's finance — at least down the road.

Moreover, Coinbase allows investors to purchase shares using any cryptocurrency recorded on GDAX, while Grayscale investments are confined to fiat. This may prove to be an attractive option for current cryptocurrency investors.

Finally,  Coinbase's finance — which has a two percent annual management fee — is less costly than Grayscale's, which charges three percent per annum.