Crypto Index Fund Bitwise Delivered 45% Returns in First 2 Months

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Crypto Index Fund Bitwise Delivered 45% Returns in First 2 Months

Despite the SEC’s reluctance to approve bitcoin ETFs, an index fund for authorized investors has outperformed cryptocurrency markets.

Bitwise Asset Management’s Bitwise HOLD 10 Index was introduced in November 2017 and includes the top ten biggest cryptoassets in the world. It returned 45% over the first two full months of operation, compared to a 1.7% return on a focused bitcoin investment during the same time period. (See also: Why Purchase This Expensive Bitcoin Trust Rather Than Actual Bitcoin?)

The previous three months have been particularly tumultuous in terms of bitcoin’s price trend. The initial coin quickly soared to over $20,000 in December. However, negative news arrived in January, and its price plummeted by more than 50% at one point. A single bitcoin is now worth $9,890 at the time of writing.

Bitwise Asset Management’s index fund outperformed bitcoin in both bull and downturn markets. In December, it returned 78% vs 39% for bitcoin. The fund’s value declined by just 18% in January, compared to 27% for bitcoin.

How Did BitwiseBeat CryptoMarkets?

To outperform cryptocurrency markets, the index took advantage of the absence of correlations between cryptocurrencies. This guarantees that several significant cryptoassets do not move “in the same direction at the same time historically,” according to Hunter Horsley, CEO of Bitwise.

According to Horsley, Dash’s price has a 1% connection with bitcoin, but NEO and Ethereum’s values have a 20% and 38% correlation with bitcoin, respectively. Bloomberg recently did a similar investigation and discovered that cryptocurrency prices showed less synchrony during moments of trader bullishness and moved in tandem during periods of trader bearishness. (Also see: Are Bitcoin Prices and Stock Markets Correlated?)

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“This has meant stronger return than Bitcoin for a diverse portfolio like the Bitwise HOLD 10,” Horsley added. This performance meant that the fund’s investors did not flee when the cryptocurrency markets reversed fortunes.

Horsley claims that his investors, who range from individuals to trusts and billionaires, have not demanded redemptions. “In fact, some raised their investment within the window, and we continued to receive investment from new customers,” he added, adding that there is a “continuous shift” in new cryptocurrency allocations.

Bitwise may have more products in the works in the future. It recently made headlines when it was announced that ETF industry veteran Matthew Hougan would be joining it as vice president of research and development. “It’s definitely of interest,” Horsley said of the idea of an ETF. “An ETF or other public fund may give access to a larger variety of constituents via regular channels, which I believe would be beneficial to investors.”

Hougan himself hinted at the prospect of a differently constructed ETF in an interview with Bloomberg. He said that he was working on “creating index methodology for the digital-asset market,” stating that criteria such as market size and weightings should be handled differently than in conventional asset classes.

Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is very dangerous and speculative, and this article is not a suggestion by Investopedia or the author to do so. Because every person’s circumstance is different, a knowledgeable specialist should always be contacted before making any financial choices. Investopedia makes no guarantees or warranties about the accuracy or timeliness of the information provided on this site. The author holds a minor quantity of bitcoin as of the day this article was published.

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