The excessive price volatility of Bitcoin- which has a finite supply and is distributed via cryptology, with no central intermediary-has elicited numerous discussions about whether the digital asset has intrinsic value. Since its launch in early 2010, Bitcoin has displayed a wild price ride, hitting an all-time high price of around $64 000 in April 2021. Thus, 2017 was a historic year in Bitcoin's price charts: the coin started at $1000 and ended at $19 783.06, representing a 1 824%…
The crypto market is back on track as we saw new all-time highs in the past weeks. Unlike in 2017, when speculative investors were the driving force behind the bull run, there is a strong push from institutional investment firms fueling this go around. It appears that Bitcoin and the entire crypto market have reached a tipping point in terms of adoption. For this reason, now is one of the best times to invest in the market.
Why Index Funds are a Smart Strategy
Index funds have been around for a long time in the traditional financial sector. These portfolios consist of stocks or bonds designed to mimic a financial market index’s composition and performance. Crypto index funds include blockchain projects and networks. Consequently, these funds allow you to track the crypto markets’ performance as a whole by holding a single crypto asset.
Crypto Index Fund Benefits
Investing in a crypto index fund makes sense when you look at the benefits gained. For one, index funds have lower expenses and fees than actively managed funds. Depending on where you live, there are also tax advantages because they generate less taxable income.
The highly diversified nature of index funds also reduces risk. History has proven that these financial instruments generally outperform other types of mutual funds in the market. As such, their addition to the cryptomarket was welcomed by investors. However, it’s vital to understand that every index fund is different. Here are the top 5 crypto index funds to consider adding to your portfolio in 2021.
Shrimpy is the most advanced index fund builder in the cryptocurrency market at this time. This powerful cryptocurrency indexing tool features a host of features to push ROIs to new heights. For example, Shrimpy users enjoy full portfolio automation. You can set your fund requirements, and the network will continually adjust your holding to meet your desires.
There’s also the rebalancing feature that streamlines the entire index management process. You can even monitor multiple indexes through the portfolio management application via a complete set of API endpoints that connect to every major exchange. In this way, the platform is incredibly flexible.
Another excellent feature exclusive to Shrimpy is Crypto Social Trading. Keenly, this system allows new users to duplicate another trader’s strategy automatically. New users can follow their favorite traders and learn from their actions. Best of all, they will also profit as they become better traders.
Amun Crypto Basket Index (HODL5)
The Amun Crypto Basket Index HODL5 is another fund that has a strong following in the market. This index fund features the top 5 and most liquid crypto assets in the market. To improve ROIs, the platform introduces a volatility management methodology. This system weighs assets based on the 2050 market cap and other vital factors.
Investors enjoy additional functionalities and benefits when they invest in HODL5. For example, there is a higher level of privacy since the fund is based in Switzerland. However, this index doesn’t include any privacy coins. Speaking on features, users gain access to multiple tracking indexes, and your portfolio automatically re-balancing monthly. HODL5 is a wise choice for those looking for a safer fund that doesn’t require a lot of selection on your end.
The Crypto20 index fund entered the market in 2017. The fund was praised as the first tokenized crypto-only index fund. Since that time, Crypto20 has continued to gain in popularity due to a combination of factors. The fund features no broker fees, no exit fees, no minimum investment, and full control over your assets.
You gain access to a variety of options to increase your returns. For example, you can customize your portfolio from thousands of cryptocurrencies to suit your investment goals. Notably, this index fund rebalances weekly and caps each asset at 10%. This cap helps to ensure that your portfolio remains safe through diversification. No one asset dropping can affect its value by more than 10%.
Bitwise is another well-known index fund. It’s generally credited as the first cryptocurrency index fund to enter the market. This fund is only available to US citizens and accredited investors at this time. The Hold10 index exclusively features only the top 10 cryptocurrencies weighted by inflation-adjusted market cap.
Bitwise leverages its size to achieve best-in-class trading execution. The platform creates a scenario in which multiple market-makers compete for buying and selling the firm’s assets. In the end, users receive better pricing alongside world-class security. Bitwise stores all investments in cold storage with an institutional third-party. In this way, Bitwise can serve the needs of enterprise-level investors.
The CIX100 index fund combines two of the fastest-growing technologies in the market, AI (artificial intelligence) and blockchain. This index fund consists of the top 100 blockchain projects chosen by an AI-powered neural network algorithm. Impressively, the AI protocol considers a wide variety of factors to come to its final decision.
Developers claim the system analyzes more than 2000 coins. These coins are reviewed and ranked in 200 factors. This portfolio index is calculated every second in real-time, and it rebalances itself continuously as the cryptocurrency market changes. The fund integrates with various top exchanges via secure API, including OKEX, Binance, Huobi, Bitfinex, Kraken, and many more. The flexibility and interoperability of this index fund make it a top contender on any list.
Top 5 Crypto Index Funds to Consider in 2021
Now that you have a better understanding of the top 5 index funds to consider in 2021, you’re prepared to expand your investment strategy. The key to success is DYOR and always stick with reputable platforms, funds, and exchanges to avoid unnecessary losses. Investing in crypto index funds can be hugely profitable if done the right way. Any of these funds will provide you with a great start to your index portfolio.