Have you always wanted to venture into the cryptocurrency market but are afraid of incurring losses due to its wildly fluctuating prices? Then you might want to consider investing in crypto index funds or ETFs instead. While they are not totally risk-free, their price fluctuations are not as exaggerated compared to the price movement of an individual token and can be considered the safer choice for beginners.
Due to the spectacular rise of the cryptocurrency market last year, the biggest of these digital assets such as Bitcoin, Ethereum, and Litecoin have become household names. While the temptation to get rich just like those countless investors who made it big in 2017 by investing in cryptocurrencies, there is also that ever-present fear that their investors just might dive in value in the blink of an eye.
Such fears are based on the unfortunate experiences of investors who can only watch helplessly as the value of their digital holdings plunged along with the crypto market’s massive correction in January. Since then, the prices of individual coins remain notoriously unstable, they could rise by 50 percent in one day just to fall just as much the next.
Mitigating Volatility Risks Through Crypto Index Fund / ETF
The main fear is that new investors in the crypto industry might pick the wrong token on their first gamble and suffer huge losses for that single mistake due to the volatility. However, there is actually a new type of cryptocurrency investment product s specifically designed to prevent this mistake of picking a wrong coin.
Crypto index funds and exchange-traded funds (ETFs) have become increasingly popular among the crypto crowd since January’s correction. It is one way of evading the volatility of a single token because these funds and ETFs are invested in a variety of coins hand-picked by their fund managers.
In fact, a number of these “potentially safer investment products” have been recently launched specifically targeting those investors who still want their piece of the crypto action but at a potentially reduced risk. The more popular ones are Bitwise Asset Management’s Hold 10 Index, Coinbase Index Fund as well as Reality Shares and Amplify’s recently launched ETFs.
Are Index Funds and ETF Really Effective?
While the history of these indexes and ETFs is still relatively short, initial data reveal that they perform better than the crypto market as a whole. According to Sam Ling, CEO of Guangzhou –based Supwin Financial Services Group, “Over the past six months, our index has a lower decline than bitcoin during corrections, but has outperformed bitcoin by 50 to 80 percent during upsurges.”
Lim will be launching a group of 20 crypto index funds he calls the “BB Index” family. He explained that “cryptocurrencies like bitcoin are too volatile, and that’s why we are launching cryptocurrency indexes.”
The Chinese entrepreneur credits his appreciation for index investing to the world-famous master investor Warren Buffett. Lim calls Buffett his “idol” and even paid a shocking $2.35 million in a bid to be able to have lunch with the investment master.
Investing in index funds is just one way to earn decent returns while minimizing risks. Another method, which could potentially net even better returns, is to participate in ICOs. One such notable upcoming ICO is Dnet’s cryptocurrency called Spyce, which will be launched later this year. For more info, visit this link.