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In June, Coinbase launched its own index fund to much excitement. The index fund was intended for “high net-worth entities,” with a minimum investment of $250,000 and a maximum of $2 million. However, Coinbase has just recently announced that this same fund would be discontinued due to a lack of institutional investor interest.
The ending of the fund comes as a shock to many since it was expected to be quite popular. When first announced in March, it was touted as an easier means for larger firms to invest in the space. The so-called ‘Coinbase Index’ was to be a benchmark of Bitcoin, Bitcoin Cash, Ether, and Litecoin. The investments of the fund would be able to be withdrawn once per quarter and customers can invest once per month.
It seems that Coinbase put out the fund to deter the poor market sentiments over the rejected ETFs earlier this year. In other words, they wanted a fund that could offer a retail option to established firms who were waiting for a retail index fund like the ETF. However, it seems that this buzz never came. With the market continuing to slide, it appears that few firms are interested in putting their money in a fund where they cannot withdraw and invest at will. Coinbase’s stipulations might have deferred potential investors. It was also only available to U.S. high-income entities, so this limited much of the potential investment.
The New ‘Coinbase Bundle’
The cancellation of the Coinbase Index comes with a new release: the release of their own Coinbase Bundle. It seems that the company learned from the failings of the index fund and has instead opted to create something smaller-scale. The new bundle product is tailored to smaller investors and refocuses Coinbase’s efforts on those smaller individuals who initially gave them the boost in 2017.
The Coinbase bundle allows individuals to buy a “basket product” for a minimum of $25. Five market-weighted crypto-assets current available on Coinbase Pro can be bought with one click as a “bundle.”
Coinbase is definitely in a period of refocusing as the bearish market sentiment continues. Trading volume is still down 80% from 2017 highs according to recent reports. However, Coinbase has been steadily expanding nonetheless. Just recently, it garnered some $500 million in new investments which now puts the company at a valuation of around a staggering $8 billion.
One commentator from Fortune Magazine wrote that Coinbase simply “wants to be too big to fail” and to become the de facto authority on the cryptocurrency space and its market. Such a task is not easy considering Coinbase is facing a long list of competitors, like Gemini.
Success Despite the Bear Market
Recently, Coinbase rolled out their first ERC20 token to be traded on their markets. The 0x Protocol (ZRX) recently opened up deposits and withdrawals on the exchange in preparation for its trading day. The token is the first of a few which will be rolled out on the exchange as the year moves on, as Coinbase looks to expand beyond its standard Ethereum-Bitcoin-Litecoin markets and their related coins.
However, the addition of ZRX was a long time in the making and, other than offering a few new custodial and investment packages, 2018 has mostly been the year of preparations for Coinbase. For example, just in May the exchange bought the platform Paradex which would enable the firm to trade “hundreds of tokens.” There has been speculation over what the rest of 2018 will entail, but most expect another token listing on the horizon.
Given that investment money for Coinbase itself is still pouring in, institutional buyers seem to be convinced of Coinbase’s success. But they weren’t interested in their investment fund, which makes you wonder: why not? Simply put, if we take the idea of cryptocurrency to its logical end, then classic index funds as in traditional finance are not that attractive. Not only are they too restrictive for a market that goes on 24/7, but the instantaneous nature of the cryptocurrency space means that any institutional delays are a hassle. The existing limitations on investment and withdrawals likely turned off some investors. We have yet to see if these problems were corrected in Coinbase’s new bundle fund.
Coinbase has many competitors: and maybe one of them will pick up the failings Coinbase has had with index funds and instead create one that’s attractive enough for high-income entities. Until then, we have to settle for the Coinbase Bundle.