Crypto index investing to start? U.S. asset managers seek SEC approval

Hashdex and Franklin Templeton race for U.S. crypto index ETF.
The diversification benefits of crypto indices make them lucrative.

As a seasoned researcher with a keen interest in the evolving world of cryptocurrencies and a background in traditional finance, I find the recent filings for U.S. crypto index ETFs by Hashdex and Franklin Templeton to be an exciting development. Having spent years studying the benefits of diversification strategies in various asset classes, it’s fascinating to see this concept being applied to the volatile yet promising realm of digital assets.

It appears that crypto index investing is picking up steam, as indicated by the filing submissions of potential issuers recently.

On October 1st, Hashdex resubmitted a revised registration document (S-1) to the U.S. Securities and Exchange Commission, following their request for additional time to scrutinize the original application for Hashdex’s crypto index ETF.

In simpler terms, another investment company, Franklin Templeton, plans to introduce a product that follows the price movements of both Bitcoin and Ethereum.

It filed an S-1, a registration statement, with the regular in mid-August.

On October 2nd, the Chicago Board Options Exchange (Cboe) submitted a proposed rule change (19b 4) to the SEC for review. The SEC needs to approve these two documents before trading of the index ETF can commence.

Put differently, asset managers wish to drive more crypto index ETF investing.

Instead of focusing on a single investment, such as the approved Bitcoin (BTC) or Ethereum (ETH) exchange-traded funds (ETFs), an index ETF provides diversified exposure to multiple assets.

Why crypto index investing

Several multi-coin crypto indices are already available, but they are only open to accredited investors in the U.S. For example, the Bitwise 10 Crypto Index Fund (BITW) tracks 10 different coins, including BTC, ETH, and SOL.

Credible investors have the opportunity to obtain these investments via exclusive trading platforms like private exchanges or over-the-counter markets.

If endorsed, both Hashdex and Franklin Templeton’s applications could make certain cryptocurrency indexes tradable on mainstream stock exchanges such as the New York Stock Exchange (NYSE) or Nasdaq.

It’s worth noting that Hashdex already has an approved crypto index ETF in Brazil and aims to replicate it in the U.S.

As a researcher delving into the world of cryptocurrencies, I’ve found that the appeal of crypto indices resides in their strategic diversification. These indices offer an opportunity for investors to tap into a multitude of digital assets, alleviating concerns about the volatility or performance of any single token.

Investing in this method is similar to putting your money into a collection of leading American stocks represented by the S&P 500 index. This index doesn’t rely on the performance of any single stock for its returns.

In a recent statement, Julien Vallet, CEO of Dutch cryptocurrency company Finst, highlighted that about one third of their retail and institutional investors are looking to diversify their portfolios by investing in crypto index Exchange-Traded Funds (ETFs).

Beyond just diversification, indices also simplify operational intricacies related to liquidity, regulation, and other factors specific to digital assets.

In July, following the endorsement of exchange-traded funds (ETFs) focused on spot Ethereum (ETH), Nate Geraci from the ETF Store expressed his belief that crypto index ETFs and actively managed ETFs focusing on cryptocurrencies would be the upcoming trends.

It appears that his prediction is coming true, which will strengthen the standing of digital assets as a viable alternative investment category.

2024-10-04 03:03

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