Coinbase Offering "Asset Management" with their Incredibly Pointless Index Fund

rulesforrebels (61)in #cryptocurrency • 8 years ago

You guys may have heard about how Coinbase is trying to get into asset management by rolling out their own index fund or ETF.

On the surface it's not a terrible idea. Over the past few years "Roboinvestors" have gained in popularity. People who aren't financially saavy, are new to investing, or whom don't want to spend time researching their investments can simply give a company money, it's invested in a diversified way for them, it automatically rebalances their portfolio, and some even offer tax loss harvesting. This type of thing definitely has some value and there's a need in the industry for it.

That said what Coinbase is doing is pretty pointless and pretty expensive. Coinbase's index fund will only have assets which are available on Coinbase which at this point in time is...

Bitcoin
Ethereum
Litecoin
Bitcoin Cash

Not only is 4 coins a pretty small and not diversified portfolio, but if we dig a bit further, Bitcoin, Litecoin and Bitcoin Cash are all just currencies, and Ethereum is a platform. We don't have the diversification of different crypto classes like utility tokens, security tokens, privacy coins, etc, etc, etc.

For this service Coinbase is going to charge 2% from what I'm hearing. Charging a high management fee to buy 4 cryptos which aren't that diversified and which one could easily just buy themselves on their own seems kind of silly and pointless.

Personally I should Coinbase probably should have waited until they had 8, 10, maybe even 12 coins on their platform before rolling something like this out.

Again, the idea itself isn't a bad one, however the management fee is high and the selection of assets is incredibly limited.

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8 years ago in #cryptocurrency by rulesforrebels (61)

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brianphobos (70) 8 years ago

I agree. That little fund they are doing is worthless for sure.

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rhyscn (49) 8 years ago

I am becoming more and more concerned about Coinbase and their decision making process. Look, I know it's not easy being a big company in such a new asset class but they preach about how they care so much about integrity in this market, yet their marketing and actions come off as very amateur and headline grabbing.

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rulesforrebels (61) 8 years ago

I totally agree, one other thing that concerns me is even if Coinbase were a great company who cared about it's customers, at the end of the day it's not good for the market to have so much power centralized with one company.

The reason Coinbase got away with offering such crappy customer service and such long downtimes of Coinbase and GDAx and trading is because ther'es really no other option for people to go elsewhere.

One thing I really respected about Bittrex and Binance is they shut down new registrations to make sure the service was good as opposed to just doing a money grab and letting service suffer while they continued to make money. Coinbase knew they were the only game in town so they knew service would suffer but said whatever where else are they gonna go.

It's cool to see Robinhood offering crypto and I see a lot of people excited but it's not really an exchange, when you buy through them my understanding is that you can't move your coins off of there, so you essentially have an IOU for Bitcoin. The other thing they don't have their own market, they are basically just using GDAX from what I understand of it. I have however heard that as it grows it should improve and they will have their own marketplace. I still however find the fact your crypto is trapped on there to be troubling.

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rhyscn (49) 8 years ago

That's a good point re; not accepting new users. They seemed to be making some big hires to address things but again not just sure of it's marketing rather than a change of philosophy. I guess we will see in time.

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artoftherhyme (65) 8 years ago

Great information. Do you know of a list that gives all of the different classes of crypto? And how do you tell what class a particular crypto falls in?

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rulesforrebels (61) 8 years ago

Some people may break it down even further but found this on the StrategicCoin website and it kind of breaks down crypto asset classes into 4 categories.

Platforms

Crypto platforms are blockchain-based networks that allow software developers to write smart contracts, which are applications that run on the blockchain and always operate as programmed without the risk of downtime or censorship. Ethereum is the most prominent crypto platform, and it has served as the foundation for most initial coin offerings (ICOs). The ICO funding model allows startups to raise capital by issuing and selling digital tokens that represent equity or another type of digital asset.

Crypto platforms often have a native cryptocurrency. Ether (ETH), for instance, is the native currency of Ethereum. These native currencies derive their value in part from the fact that smart contract participants must use them to pay to run their applications.

Tokens

A crypto token is like a cryptocurrency, except its network is secured by another coin or platform’s blockchain. Tokens are created through smart contracts and often distributed through initial coin offerings. Tokens may be classified as asset or utility coins.

Utility tokens

sometimes called app coins–provide users with access to a product or service and derive their value from the demand for that service. For example, Golem held an ICO to raise capital to develop a decentralized supercomputing network that harnesses excess computing power. ICO participants received Golem Network Tokens (GNT) that they will be able to use to rent computing power once the network launches.

Assets

A crypto asset is a blockchain-based coin or token that signifies and derives its value from something that does not exist on the blockchain. For example, Tether (USDT) is a crypto asset whose value is pegged to USD. The developers of Tether back each token with $1 of fiat assets stored in reserve accounts, enabling users to trade fiat currency on the blockchain. One particularly promising type of asset token is the equity token, which allows company stock to be issued and traded on the blockchain.

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