From 2013 to 2016, there was a massive influx of cryptocurrency and blockchain-startup investments, Venture Capital firms injected over a billion dollars of liquidity into the industry, solidifying that moment in history as the era of VC blockchain investments. In this article you will learn about a new type of crypto investment altogether and a new class of investors.

Introducing The Cryptocurrency Fund — A New Class of Asset

Investment funds have been around for decades. Their very creation opened up a world of investment opportunities to a significantly broader audience than ever before by giving anybody with capital the opportunity to invest in a professionally managed fund, regardless of their experience level or knowledge.

Now that cryptocurrencies are on the rise, and being sized up by VCs, Wall Street and the likes, it makes sense that investors would eventually turn towards cryptocurrency fund investments to increase their exposure to the market.

How does it work?

In this article, we’re defining a cryptocurrency fund as a liquidity pool consisting of publicly traded cryptocurrency assets that are professionally managed.

Publicly and Privately Traded Buy-and-Hold Funds

These operate with a buy-and-hold strategy, usually with a single asset (mostly Bitcoin), and charge investors a management service fee (approx. 1.5–2.5% annually). This can seem counter-intuitive to Bitcoin’s original concept, which was to let people control their finances and eliminate the need for trust and reliance on third parties. The issue with investing in this type of fund is that a user is entrusting a third party with their cryptocurrency, which takes us back to the pre-blockchain model.

Why not invest directly in crypto?

The attraction of these types of funds is mainly the ease they offer investors who can opt for this instead of having to worry about how they will manage and store their crypto funds. This seems to rely heavily on the fact that many new and highly liquid investors are not so “savvy” with cryptocurrencies and would prefer to have their crypto managed, even if it’s for a considerable premium.

Longevity of funds

Although they are becoming a popular vehicle for investors to increase their exposure to the crypto market, it’s possible that this model will become obsolete as crypto-literacy becomes the norm, much like how very few people would need help setting up an email address today when compared to the early 1990s.

Hedge Funds

Another type of crypto investment fund that has been attracting new investors is the crypto hedge fund, which is also a pool of liquidity consisting of publicly traded cryptocurrency assets. However, does not rely on investing in a single or small number of assets and the managers can freely trade the funds. These funds operate on the idea that the fund managers can outperform an agreed benchmark, e.g. Bitcoin. If the managers successfully outperform the benchmark asset, they take a much higher fee than with buy-and-hold funds, ranging from 15–45%, however, this fee is only paid out if the managers successfully beat the benchmark.

Why not invest directly in crypto?

In this case, it is self-explanatory, investors look to hedge funds to higher a return than investments directly into crypto assets. They get the advantage of professional knowledge, experience and skill, and for this, investors are willing to pay an astronomical premium.

Longevity of funds

Theoretically these funds have more long-term potential than your average buy-and-hold because they do not rely on cryptocurrencies current usability, and instead base their product around the knowledge and trading finesse of their management. This has the potential to see funds grow through peaks and dips in the market and can be much more profitable than investing in a single asset.

Blockchain-Based Asset Management

Now that blockchain is being explored more deeply; new innovations are arising every day. One very promising new investment fund model is a new, blockchain-based take on personal asset management.

Blockchain-based crypto asset management is a response to traditional asset management by a private manager. Previously, to access this kind of service, an investor would need to have a considerable amount of trust in their manager due to the pseudonymous nature of crypto, low liquidity of certain assets, and the inherent risks that come with trusting a third party with crypto. This is why companies like CINDX have been developing a new way to invest in the crypto market, without requiring investment knowledge or trust in third parties.

The CINDX platform allows any investor to browse through a list of world-class managers, view their trading history, statistics and ranking (and more). Then users can choose the manager they would like to manage their assets, and at the click of a button, all their trades will be automated to match the trades of the manager, meaning that any trader can lock-in the same level of profit as a seasoned pro-trader.

Why not invest directly in crypto?

Much like hedge funds, managers on the CINDX platform will be operating on the basis that they can achieve a benchmark return higher than that of the crypto market or any single crypto asset. The advantage of using CINDX of a crypto hedge fund is that users can view and verify every manager’s detailed trading history, eliminating the need to trust a manager’s quoted performance. Instead, users can base their choice on blockchain-verifiable data and statistics.

It also gives users a superior level of automation and flexibility over their crypto investments, because investors will be able to withdraw, or reinvest profits as they please, and can change managers at any time. Different managers can have different risk tolerances and trading styles. Therefore a diverse range of managers means that there will eventually be a manager for every kind of trading strategy, system and investor out there.

Longevity of funds

Since crypto asset management can be viewed and controlled in real-time, i.e. users are always in control of their funds and can stop management, or change management at any time, the longevity of funds is less of an issue with CINDX. As long as there are liquid crypto markets (regardless of asset price) there will be traders who can profit from them, and as long as there are highly skilled traders that can profit from crypto (there are traders that can profit from pretty much any market), then there will be opportunities for investors to make the same returns using CINDX.

Sincerely yours,

CINDX Team