Crypto Index Fund

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bligh
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Crypto Index Fund

Post by bligh »

Coinbase just launched both a new Crypto Index (Coinbase Index) and a Crypto fund that follows that index. It is market cap weighted.

https://blog.coinbase.com/announcing-co ... 25fbf548db

Looks like there is a 2% annual management fee with a $10K minimum. You have to be an accredited investor.

https://am.coinbase.com/

I, personally, am not interested in it... but I have to say that is a brilliant move on Coinbase's part - Bringing the passive indexing approach to crypto currencies is going to bring them a lot more money. They make a sweet $200/year off of the investor even if he puts in just the minimum.
Last edited by bligh on Tue Mar 06, 2018 6:27 pm, edited 1 time in total.
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wassabi
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Re: Crypto Index Fund

Post by wassabi »

What is an accredited investor?

Edit: never mind, found it here: https://www.investor.gov/additional-res ... -investors
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Re: Crypto Index Fund

Post by oldcomputerguy »

wassabi wrote: Tue Mar 06, 2018 6:04 pm What is an accredited investor?

Edit: never mind, found it here: https://www.investor.gov/additional-res ... -investors
According to Investopedia, “An accredited investor is a person or entity that can deal with securities not registered with financial authorities by satisfying one of the requirements regarding income, net worth, asset size, governance status or professional experience.”
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Re: Crypto Index Fund

Post by willthrill81 »

oldcomputerguy wrote: Tue Mar 06, 2018 6:07 pm
wassabi wrote: Tue Mar 06, 2018 6:04 pm What is an accredited investor?

Edit: never mind, found it here: https://www.investor.gov/additional-res ... -investors
According to Investopedia, “An accredited investor is a person or entity that can deal with securities not registered with financial authorities by satisfying one of the requirements regarding income, net worth, asset size, governance status or professional experience.”
Apparently, the SEC does not believe that lower income or lower net worth individuals are capable of determining whether these types of investments are appropriate for them and/or able to deal with the ramifications of poor investment performance.
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Re: Crypto Index Fund

Post by david1082b »

Can't wait for the crypto mining fund from Vanguard, investing in nothing but the best-quality crypto miners and exchanges, as well as being allowed to have 20% of its assets in cryptocurrencies, a nice companion to the Vanguard Precious Metals and Mining Fund, which "may place up to 20% of its assets directly in gold, silver, or other precious-metal bullion and coins".
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Re: Crypto Index Fund

Post by am »

At least it will be very tax efficient as there won’t be any dividends. Don’t think capitol gains will be distributed either as it won’t be regulated like mutual funds. How will it rebalance? Given the volatility, this may be on a daily basis. Fun little product, kinda like gambling every day but not having to go to a casino.
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Re: Crypto Index Fund

Post by aristotelian »

willthrill81 wrote: Tue Mar 06, 2018 6:15 pm
Apparently, the SEC does not believe that lower income or lower net worth individuals are capable of determining whether these types of investments are appropriate for them and/or able to deal with the ramifications of poor investment performance.

They are right. Unfortunately, higher net worth people are also not capable of determining whether these investments are appropriate for them...Fortunately, they have greater ability to absorb a big loss.
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Re: Crypto Index Fund

Post by willthrill81 »

aristotelian wrote: Tue Mar 06, 2018 6:48 pm
willthrill81 wrote: Tue Mar 06, 2018 6:15 pm
Apparently, the SEC does not believe that lower income or lower net worth individuals are capable of determining whether these types of investments are appropriate for them and/or able to deal with the ramifications of poor investment performance.

They are right. Unfortunately, higher net worth people are also not capable of determining whether these investments are appropriate for them...Fortunately, they have greater ability to absorb a big loss.
Perhaps. I still view it as a very patriarchal move on their part. They have no problem with non-accredited investors going to a casino and putting it all on red, yet they will not allow these same people to purchase a number of at least passingly reasonable investments.
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zonto
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Re: Crypto Index Fund

Post by zonto »

The SEC is not directly forcing Coinbase to only sell to accredited investors. A company like Coinbase that elects to offer and sale securities, like this crypto index fund, must register those securities with the SEC unless it finds an exemption from those registration requirements. One of those exemptions is to only sell to accredited investors. Were they not to, they would need to register the securities which is a much more time-consuming and expensive process.

See: https://www.sec.gov/fast-answers/answers-accredhtm.html

Note that Coinbase also said: "We’re working on launching more funds which are available to all investors and cover a broader range of digital assets."
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Re: Crypto Index Fund

Post by gsmith »

willthrill81 wrote: Tue Mar 06, 2018 7:01 pmPerhaps. I still view it as a very patriarchal move on their part. They have no problem with non-accredited investors going to a casino and putting it all on red, yet they will not allow these same people to purchase a number of at least passingly reasonable investments.
You should interpret "only for accredited investors" as code for "We are unable to provide the audited bookkeeping/disclosures/definition of an investment that would stop most scams, but as a smart investor you can navigate the due diligence by yourself instead of relying on the SEC."

The difference between gambling and investing is that investments have a "house edge" (positive expected return) over time, while the casino's edge ensures the gambler will lose over time, seducing them into "one more hand". From an ammoral perspective, betting $1 red once at the roulette wheel would have an expected value of −$0.053, classifying it as "entertainment".

*A shame really, since it's not correlated to other asset classes.
** If you can travel to France, their wheels don't have "00", so the expected value is cut down to −$0.027.
*** Bon chance!
Last edited by gsmith on Tue Mar 06, 2018 7:25 pm, edited 1 time in total.
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Re: Crypto Index Fund

Post by willthrill81 »

gsmith wrote: Tue Mar 06, 2018 7:18 pm
willthrill81 wrote: Tue Mar 06, 2018 7:01 pmPerhaps. I still view it as a very patriarchal move on their part. They have no problem with non-accredited investors going to a casino and putting it all on red, yet they will not allow these same people to purchase a number of at least passingly reasonable investments.
You should interpret "only for accredited investors" as code for "We are unable to provide the audited bookkeeping/disclosures/definition of an investment that would stop most scams, but as a smart investor you can navigate the due diligence by yourself instead of relying on the SEC."
There are some solid investments out there that are only available to accredited investors. Conversely, a number of "SEC approved" investments are horrific.
gsmith wrote: Tue Mar 06, 2018 7:18 pmThe difference between gambling and investing is that investments have a "house edge" (positive expected return) over time, while the casino's edge ensures the gambler will lose over time, seducing them into "one more hand". From an ammoral perspective, betting $1 red once at the roulette wheel would yield $0.9274, classifying it as "entertainment".
Entertainment or a bad 'investment', either way the person has lost money. How to classify the means of the loss is irrelevant when it comes time to pay the bills.

I would much prefer that the SEC require firms selling such investments to say something to the effect of "This investment has not been reviewed by the SEC."
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Re: Crypto Index Fund

Post by thx1138 »

willthrill81 wrote: Tue Mar 06, 2018 7:01 pm
aristotelian wrote: Tue Mar 06, 2018 6:48 pm
willthrill81 wrote: Tue Mar 06, 2018 6:15 pm
Apparently, the SEC does not believe that lower income or lower net worth individuals are capable of determining whether these types of investments are appropriate for them and/or able to deal with the ramifications of poor investment performance.

They are right. Unfortunately, higher net worth people are also not capable of determining whether these investments are appropriate for them...Fortunately, they have greater ability to absorb a big loss.
Perhaps. I still view it as a very patriarchal move on their part. They have no problem with non-accredited investors going to a casino and putting it all on red, yet they will not allow these same people to purchase a number of at least passingly reasonable investments.
Well first the SEC has no jurisdiction over casinos or lotteries so we can really only hold them accountable for their decisions regarding things they actually have regulatory control over. Why not blame the SEC for not also preventing people from spending their money on booze and cigarettes?

Second rather than being "patriarchal" to me it seems one of the simplest common sense regulations around. Leave the less regulated investments to those who can afford to lose their money. In general one of the fastest ways to sort people by their ability to earn money is to see if they already have money or are presently earning a lot of money. It isn't perfect but it is about as pareto optimal an indicator as one could conceive.

Third, it isn't like any non-accredited investors are missing out on anything here. Can anyone name any asset class only available to accredited investors that should be present in a modest portfolio with any meaningful allocation?
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Re: Crypto Index Fund

Post by aristotelian »

willthrill81 wrote: Tue Mar 06, 2018 7:01 pm Perhaps. I still view it as a very patriarchal move on their part. They have no problem with non-accredited investors going to a casino and putting it all on red, yet they will not allow these same people to purchase a number of at least passingly reasonable investments.
True. Crypto index can't be any worse than lotto tickets.
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Re: Crypto Index Fund

Post by patrick »

It looks like this only includes 4 assets. What is the point of paying 2% a year for something when it wouldn't be that hard to just buy the components individually?
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Re: Crypto Index Fund

Post by ThriftyPhD »

patrick wrote: Tue Mar 06, 2018 7:56 pm It looks like this only includes 4 assets. What is the point of paying 2% a year for something when it wouldn't be that hard to just buy the components individually?
If you tried to do it yourself, the rebalancing fees could be brutal. For example, when bitcoin was trading very high, each transaction was costing $34. By pooling buys and sells, they could potentially save a fair bit.

Not that I would recommend this...
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Re: Crypto Index Fund

Post by nisiprius »

zonto wrote: Tue Mar 06, 2018 7:13 pm...Note that Coinbase also said: "We’re working on launching more funds which are available to all investors and cover a broader range of digital assets."
The Winklevosses are still working on launching theirs.

Since 2013.

It's perpetually implied to be just a few months away from regulatory approval. The SEC rejected it in March 2017,
because it does not find the proposal to be consistent with Section 6(b)(5) of the Exchange Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest.
The BATS Exchange petitioned the SEC to reconsider, the SEC accepted the petition and agreed to reconsider it... and that's the last I've heard of it. It's been a year now, and... the COIN ETF still does not exist. Any crypto fans know anything more about it?

Given that Coinbase is credibly accused of insider trading, I think the SEC will be even more cautious with Coinbase than it has been with the Winklevosses.
Last edited by nisiprius on Tue Mar 06, 2018 9:43 pm, edited 2 times in total.
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Re: Crypto Index Fund

Post by aegis965 »

There are already some tokens providing cap-weighted exposure to the crypto market, albeit with obscene fees, 5% enter and 5% exit, for example.
I may be biased.
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Re: Crypto Index Fund

Post by pkcrafter »

High risk assets are sometimes only available to "accredited" investors because they can afford to lose more money. :moneybag

SEC and crypto currency.
In January, the SEC warned that it was "looking closely" at companies that are involved in cryptocurrency (and using associated terms to boost stock). But now, it appears that the regulatory organization is doing more than just keeping an eye on things.
https://www.engadget.com/2018/03/01/sec ... continues/

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Re: Crypto Index Fund

Post by Nate79 »

Cool. Let me go grab my credit card so I can buy this sure thing.
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Re: Crypto Index Fund

Post by Eric76 »

What could possibly go wrong? :D
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Re: Crypto Index Fund

Post by AlohaJoe »

ThriftyPhD wrote: Tue Mar 06, 2018 8:55 pm
patrick wrote: Tue Mar 06, 2018 7:56 pm It looks like this only includes 4 assets. What is the point of paying 2% a year for something when it wouldn't be that hard to just buy the components individually?
If you tried to do it yourself, the rebalancing fees could be brutal. For example, when bitcoin was trading very high, each transaction was costing $34. By pooling buys and sells, they could potentially save a fair bit.

Not that I would recommend this...
It only rebalances once a year. 4x34 is still quite a bit less than the annual fee.
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Re: Crypto Index Fund

Post by tennisplyr »

patrick wrote: Tue Mar 06, 2018 7:56 pm It looks like this only includes 4 assets. What is the point of paying 2% a year for something when it wouldn't be that hard to just buy the components individually?
+1
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Re: Crypto Index Fund

Post by Valuethinker »

willthrill81 wrote: Tue Mar 06, 2018 7:01 pm
aristotelian wrote: Tue Mar 06, 2018 6:48 pm
willthrill81 wrote: Tue Mar 06, 2018 6:15 pm
Apparently, the SEC does not believe that lower income or lower net worth individuals are capable of determining whether these types of investments are appropriate for them and/or able to deal with the ramifications of poor investment performance.

They are right. Unfortunately, higher net worth people are also not capable of determining whether these investments are appropriate for them...Fortunately, they have greater ability to absorb a big loss.
Perhaps. I still view it as a very patriarchal move on their part. They have no problem with non-accredited investors going to a casino and putting it all on red, yet they will not allow these same people to purchase a number of at least passingly reasonable investments.
The SEC does not regulated gambling in the USA as far as I know?

So it's an apples-to-oranges comparison -- reasoning by false analogy?

However I believe the CFTC similarly restricts individual speculation in commodity futures and forwards? So there is a symmetry there?
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Re: Crypto Index Fund

Post by Valuethinker »

pkcrafter wrote: Tue Mar 06, 2018 10:19 pm High risk assets are sometimes only available to "accredited" investors because they can afford to lose more money. :moneybag

SEC and crypto currency.
In January, the SEC warned that it was "looking closely" at companies that are involved in cryptocurrency (and using associated terms to boost stock). But now, it appears that the regulatory organization is doing more than just keeping an eye on things.
https://www.engadget.com/2018/03/01/sec ... continues/

Paul
They are looking at ICOs now, too, I believe.
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Re: Crypto Index Fund

Post by bberris »

nisiprius wrote: Tue Mar 06, 2018 9:03 pm ...
Since 2013.

It's perpetually implied to be just a few months away from regulatory approval.

...
Well, it is always months away from approval.
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Re: Crypto Index Fund

Post by willthrill81 »

Valuethinker wrote: Wed Mar 07, 2018 7:35 am
willthrill81 wrote: Tue Mar 06, 2018 7:01 pm
aristotelian wrote: Tue Mar 06, 2018 6:48 pm
willthrill81 wrote: Tue Mar 06, 2018 6:15 pm
Apparently, the SEC does not believe that lower income or lower net worth individuals are capable of determining whether these types of investments are appropriate for them and/or able to deal with the ramifications of poor investment performance.

They are right. Unfortunately, higher net worth people are also not capable of determining whether these investments are appropriate for them...Fortunately, they have greater ability to absorb a big loss.
Perhaps. I still view it as a very patriarchal move on their part. They have no problem with non-accredited investors going to a casino and putting it all on red, yet they will not allow these same people to purchase a number of at least passingly reasonable investments.
The SEC does not regulated gambling in the USA as far as I know?

So it's an apples-to-oranges comparison -- reasoning by false analogy?

However I believe the CFTC similarly restricts individual speculation in commodity futures and forwards? So there is a symmetry there?
Lost money is lost money however it is lost. As noted above, buying a cryptocurrency index is probably no worse than buying a lottery ticket. Since we permit the latter for everyone, why not the former?
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Re: Crypto Index Fund

Post by LadyGeek »

This thread has run its course and is locked (speculation on what the SEC "might" do). See: Non-actionable (Trolling) Topics
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