Due to the lack of a proper investment platform for virtual currencies, Hunter Horsley, a senior project manager from Facebook, and Hong Kim, a Google veteran, decided to build a cryptocurrency asset management company. They founded the first ever cryptocurrency index fund, Bitwise Asset Management, which is now backed by AngelList founder and power broker, Naval Ravikant. The company will manage the cryptocurrency portfolio for the interested investors. The barriers of entering the cryptocurrency market are high, as purchasing a single type of coin is a risky and not an effective strategy. Moreover, purchasing, setting up, and operating a mining rig is out of the question for most people.
Investing in an index funds is relatively easier than trying to tackle the rapidly growing cryptocurrency market. Bitwise is simplifying the process of investment while minimizing the risks. While talking to CoinDesk, Horsley states:
"We want to create a meaningful and secure way to own a portfolio of cryptocurrency. We feel that today, it's too hard and it's too expensive."
The index is based on Hold10 index, which contains the top 10 cryptocurrencies from all over the world and provides the investors with a diverse range of investments.
Investors can buy into the fund for a $10,000 investment with only a 2% annual fee. Bitwise does not charge against profits, which is against the conventional methodologies of hedge funds. Usually, hedge funds charge as much as 20% against profits, in addition to the investment fee.
Bitwise will use a passive trading strategy that is suited for long-term investments. Portfolios will comprise of a broad range of currencies to represent the larger market and minimizes the losses that can be caused by the downturn of a specific digital currency.
Another protection feature that has been added for the investors is that the investments will be kept in an offline, secure “cold storage,” which will protect them from any cyber-attacks. Therefore, the customers will not have to worry about securing their crypto-wallets either. While discussing this strategy, Horsley says:
"The only time the assets will come out of cold storage is when the fund rebalances itself – meaning the times when the fund must buy or sell coins in order to reflect the same relative market capitalizations of the market more broadly."
Bitwise hopes to be a safe and secure alternative to get into the money-making market of cryptocurrencies. For now, the company is only dealing with investments inside the US. However, they are looking forward to expanding their operations into other countries in the future.