What you need to know about the world's first cryptocurrency index fund

May 11, 2018 by Andy Penkalski

Three people in a coffee shop using laptops and smartphones to research cryptocurrency

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In recent months, the financial services industry has witnessed several interesting developments around cryptocurrency's inevitable evolution toward greater adoption and legitimacy. In December 2017, Bitwise Asset Management launched the Bitwise HOLD 10 Private Index Fund, which allows for investors to hedge their bets across the 10 largest cryptocurrencies in lieu of gambling on a single performer.

At the end of March, Bitwise announced that the fund now supports investment from self-directed individual retirement accounts (IRAs), and here is what you need to know.

The cryptocurrency index fund has been beating crypto markets

In its first two months of operation, the HOLD 10 Index delivered returns of 45 percent versus a 1.7 percent return for a concentrated investment in bitcoin during the same time period.

According to Investopedia, Bitwise is able to outperform individual cryptocurrency markets by exploiting the lack of correlations among the currencies, ensuring that many large crypto assets do not move in the same direction simultaneously.

Serious investors only

While the fund is now open to IRAs, the HOLD 10 Index still boasts an accreditation rubric for eligibility that will exclude even most mass affluent investors. Investors must command more than $200,000 in annual income ($300,000 for couples) or more than $1 million in net assets.

The fund charges a 2.5 percent annual management fee, with no hidden costs or performance fees. At the time of launch, the HOLD 10 Index also required a minimum investment of $25,000.

Bitwise is betting on past successes 

Some of the key talent at Bitwise previously cut their teeth in the ETF world. Their global head of research is Matt Hougan, former CEO of ETF.com. According to Hougan, early institutional ambivalence around exchange-traded funds bears great resemblance to the skepticism facing his new cryptocurrency venture. He says the same level of research, fund classifications, and performance data will legitimize funds like the HOLD 10 Index in due time. 

The steep accreditation factors make it unlikely that many advisors will witness any qualified clients opting to reposition their retirement fund around the HOLD 10 Index, and the remarkable success Bitwise has seen during its brief existence could be shook by volatility. Only time will tell if its stellar relative market performance can continue.  

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