As entrepreneurs look to take cryptocurrency mainstream, they’re copying a tried-and-trusted approach from traditional investing: indexing.
Magazine by Cointelegraph
November 5, 2019
By Robert Stowe England
Index investing is designed to generate returns that are similar to a broad market index. This approach can reduce the risk of picking individual assets that might underperform the broad market. So, in the case of an equity index, instead of picking, say, Exxon, Apple, Johnson & Johnson and Ford, you invest in the broad market.
Several new crypto index products have launched recently, offering investors new avenues into the market without some of the risks associated with putting money into single blockchain projects.
Crypto indexers take their cues from broad stock market index funds, such as those based on the S&P 500 Index. An investor does not have to know every detail about the changing public tastes in the ever-burgeoning soft drink market or the corporate strategy of Coca-Cola or Pepsi — or any other market or company — to invest in the S&P 500 index fund. An investment in an S&P 500 Index fund will give the investor broad market exposure.
The simplicity and ease of investing in stock and bond indexes helped create the enormous $19.4 trillion market represented by U.S. mutual funds and exchange-traded funds (ETFs) tracked by Morningstar.
“We’re trying to be the BlackRock of crypto,” says Hunter Horsley, CEO of San Francisco-based Bitwise Asset Management, which pioneered crypto index investing in 2017. BlackRock is the world’s largest asset manager and also the largest provider of ETFs through its iShares division.
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