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Crypto20 and the Rise of Cryptocurrency Index Funds

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It has been more than two months since Crypto20 concluded its public crowdsale. Over that period, the value of its tokenized crypto index fund has fluctuated dramatically, reflecting broader movement in the digital currency market. For passive investors, the fund offers a simple and cost effective way to gain exposure to the world’s leading class of cryptocurrencies. It’s often said you get what you pay for. In the case of Crypto20, the underlying token is usually priced at a significant premium over the fund’s net asset value (NAV).

Crypto20: An Introduction

The Crypto20 index fund provides investors with a single asset in which to track the performance of the cryptocurrency market. The portfolio, which launched in October, provides exposure to the top-20 cryptocurrencies by market capitalization, allocating a maximum component weighting of 10%. The fund buys the 20 largest cryptocurrencies and re-balances its position weekly based on the market’s performance.

Investors gain exposure to the fund by purchasing the C20 cryptocurrency, which is normally marked at a significant premium over the NAV price. Although some have argued this points to significant speculation in the market, it may be justifiable to those who are willing to pay a premium for convenience. After all, purchasing 20 cryptocurrencies separately, storing them in different wallets and rebalancing the holdings weekly is a time consuming process that an index fund can take care of much more efficiently.

According to the C20 fact sheet, the fund charges a flat annual fee of 0.5%. There are no other fees associated with the fund and traders can exit at any time.

Indexing is slowly breaking ground in the crypto market. In addition to C20, Bitwise recently launched a cryptocurrency index fund holding the top 10 digital assets. A platform by the name Bit20 also appears to offer a similar product as C20, although the re-balancing is done less frequently. There’s reason to believe these assets will continue to grow as investors adopt conventional assets to play the volatile cryptocurrency market.

Grayscale’s Bitcoin Investment Trust is another traditional asset vehicle that provides exposure to the crypto market, although its entire focus is bitcoin. The fund was conceived in 2013 and has more than $1.7 billion in assets under management (AUM). Total shares outstanding are 175,984,800, according to the fund’s website. Its annual fee is 2%.

Fund Performance

The Crypto20 fund has been extremely volatile since its inception – a feature that cryptocurrency traders have come to expect. The fund’s total value peaked above $164 million U.S. in early January as the cryptocurrency market soared to record highs. Since peaking, it has declined by more than 50% to $70 million.

From a NAV perspective, the fund peaked at $4.05 but is now at $1.72.

The C20 token has followed a similar trajectory, although the coin has only been trading for a few weeks. It was down more than 17% on Monday to $2.13, having reached an earlier low of $1.98.

Trade volumes over the past 24 hours reached $2.8 billion, according to data provider CoinMarketCap.

Disclaimer: The author has no exposure to Crypto20. 

Featured image courtesy of Shutterstock.

 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 741 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Altcoins

Will Ethereum Continue Rally Ahead Of Constantinople Hard Fork?

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“Clear eyes, full hearts, can’t lose.”  One of my favorite quotes from “Friday Night Lights” is a great way to describe the new year.  2018 was rough, brutal, and painful.  But with a new year comes new opportunities.  Crypto markets have started off strong during the first week of January.  Bitcoin gained nearly 5% on Sunday and now trades at approximately $4,060.  The broader crypto market has also followed suit as several notable coins have generated substantial gains.  Those coins include:

  • Ripple (XRP) with a 3% gain
  • Litecoin (LTC) with a 10% gain
  • Stellar (XLM) with a 5% gain
  • Ethereum (ETH) with a 2% gain

While the gains are a great way to bring in the new year, the market is still very cautious regarding the next step.  For cryptocurrencies to truly break out of the current bear market, they likely need to reach a market valuation of $230 billion.  Bitcoin would also need to trade at approximately $6,000.  So, based on today’s levels, there is still substantial work left to do.

Ethereum Hard Fork

Binance has just announced plans to support the Ethereum Constantinople Hard Fork which is currently scheduled for January 16th.  Traders need to be reminded that January 16 is the expectation, but nothing is set in stone.  When asked about the firmness of the data, Peter Szilagyi, an Ethereum core developer had this to say: “We can just mid-January, it doesn’t make a difference if we decide on a date or not.  We can always postpone.”

Ethereum has already had to delay the Constantinople upgrade once before after developers detected some errors on the testnet platform.  Given the complexity of the upgrade, it wouldn’t be a surprise if an additional delay was necessary.

Is the Hard Fork Necessary?

In a word, yes.  There are a few issues at play here.  The first is the “difficulty bomb.”  The difficulty bomb is the term used to indicate the increasing level of mining difficulty that results in an increased amount of time required to mine a new block on the Ethereum blockchain.  Block times are expected to begin increasing this month and could hit 30-second block times by May.

Some traders may be wondering why this “bomb” was put in place.  It’s a bit complex but essentially was designed as a deterrent for miners, who may opt to continue with Proof of Work (miners compete directly against each other), even as the blockchain transitions to Proof of Stake (where rewards are based on staking).  With the bomb in place, Ethereum will need to undergo regular network upgrades.

The Constantinople Upgrade

Constantinople is a system-wide upgrade that was enacted at the end of August, 2018.  The upgrade includes five different Ethereum improvement proposals (EIPs).  After the proposals are released on Ethereum, the blockchain will be permanently altered with new backwards-incompatible upgrades.

This essentially means that the network of computers that run Ethereum software must either update or continue running independently.

There is no doubt that hard forks have caused a great deal of squabbles in the past.  The most notable of which occurred with the Bitcoin Cash (BCH) hard fork.  Roger Ver, known as “Bitcoin Jesus” and the most prominent supporter of Bitcoin ABC, took a position in favor of the new software upgrade.  On the opposite side, Craig Wright, who claims to be Satoshi Nakamoto, was in favor of expanding the maximum block size from 32MB to 128MB.  ABC appears to have won that war.

Ethereum Rally Can Continue

Ethereum has had a monster rally over the past 30 days, gaining more than 80%.

So, while Ethereum miners are likely quite anxious as we approach the hard fork, the broader market appears to be quite fond of it.  I expect the rally to continue as we approach January 16th.

One risk is that if developers announce another delay.  A short delay probably wouldn’t have a major impact on price, but a delay of any meaningful length could lead to a selloff.  Traders looking to initiate a short-term trade may want to make use of stop limit trades.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Altcoins

Encrypgen (DNA) Surges 50% On Heavy Volume

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As the new year begins, crypto traders are certainly filled with hope that 2019 will be more bullish than last year.  There was an article I read a few days ago that laid out some really strong reasons why traders should be optimistic about cryptocurrency in 2019.  The logic is sound.  And while diversified crypto portfolios are always the best bet, traders may want to make Encrypgen (DNA) a large part of their portfolios.  I expect DNA to be one of 2019’s top performing tokens.

Strong Trading Session

During the past six months, I’ve written extensively on Encrypgen as I feel the company has significant potential.  And now, with the new year upon us, it appears that other traders are finally catching on.  DNA exploded nearly 50% on one of its largest volume days in recent history.  The coin has since re-traced but is still up approximately 30% (as of this writing).

This is especially significant because of the large sell wall that had been in place for weeks.  One large token holder needed to exit the position for personal reasons.  And those tokens are now held in strong hands who believe in the project.  Now that the sell wall has broken, DNA hodlers can expect significant growth, both in the business and in the token price.

Encrypgen Team Focused On Business Growth

While not true for many crypto projects, Encrypgen has been focused on the core business regardless of the token price.   In December, Encrypgen announced a partnership with Murrieta Genomics.  This has the potential to be an invaluable partnership as Encrypgen continues to see increasing genomic data sets uploaded to the Gene-Chain.

In addition to working on getting consumers to upload their genomic data sets, Encrypgen is also getting researchers to sign-on to the platform.  For a true marketplace to occur, it is of course necessary to have both buyers and sellers.  On the Gene-Chain, consumers are the sellers and researchers are the buyers.  Researchers will use DNA tokens to purchase data direct from consumers.  This volume is what will end up driving the DNA token price.  The vision is for Encrypgen to become the Amazon.com of genomic data.

Future Developments in 2019

As the company continues to progress, token holders can expect significant developments throughout the rest of the year.  Some of these expected developments include:

  • Additional Partnerships
  • Venture Capital Funding
  • Genomic Data Set Growth
  • New Exchange Listings

There is no doubt that cryptocurrency can be a momentum game at times.  And now with the recent surge in DNA trading, Encrypgen appears to have significant momentum.  The question will be if the company can maintain it.

DNA token hodlers can expect to see a barrage of news coming out in the next few weeks and beyond.  Many of these announcements will center around additional partnerships that will help drive the company’s core business.  In addition to that, the company is securing additional funding from a venture capital deal.  If a VC deal is completed, it could have a significant impact on the token price.  As the business progresses, it will also be important to keep an eye out for signs of growth in the number of genomic data sets that consumers have uploaded to the Gene-Chain.  The more sets that are available, the more transactions that will occur between consumers and researchers.

Lastly, but probably least importantly, will be news regarding new exchanges.  Encrypgen maintains its position that it will not pay bribes to have its token listed on exchanges.  And that is certainly the right decision.  But, hopefully, legitimate large exchanges like Bittrex will see the potential that the DNA token has and list it.  If that happens, it would be a boon for the DNA token price.

Conclusion

Encrypgen remains the top position in my portfolio.  Although 2018 was a rough year, I certainly expect that to turn around during the next 12 months.  And while I expect many altcoins to participate in a crypto rally, I fully expect DNA to be a top performer.

Disclosure:  Chris has a long position in DNA

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Bitcoin

Mainstream Adoption of Bitcoin Will Send Price Soaring

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The pain inflicted by the crypto markets has been extreme this year.  It’s become clear that the market ran way too high, way too fast in 2017.  Many traders knew a severe correction was forthcoming, but I doubt many predicted the correction (now a full-fledged bear market) would be this extreme.  While the markets have been painful, Bitcoin (BTC) serves a bigger purpose than just making money in the markets.  To some, that purpose is a worldwide digital currency that can eventually be used to purchase anything.  To others, the purpose is a store of value to prevent against the inflation that plagues FIAT currencies.  Either way, it’s important to remember that this is just the beginning.

Early Phase of Adoption

Bitcoin is still in the very, very early phase of adoption.  Let’s look at the graph below.

The technology adoption life cycle is a sociological model that describes the adoption or acceptance of a new product or innovation, according to the demographic and psychological characteristics of defined adopter groups.

Many consumers still have no idea what Bitcoin is.  When people google the term Bitcoin, they are likely to get the following definition:  Bitcoin is a digital currency that is not backed by any country’s central bank or government.  Bitcoins can be traded for goods or services with select vendors.  But the truth is that Bitcoin can’t be used to buy things that would be useful for most people.   Consumers can’t use Bitcoin to buy groceries, pay the cable bill, pay for medical expenses, buy a car, or purchase a home.  For years, Expedia (one of the world’s largest travel booking engines) allowed consumers to use Bitcoin to make hotel reservations.  But even that was taken away in June.

Clearly, Bitcoin has yet to achieve its intended goal.  Based on the graph above, I can confidently claim that Bitcoin is still in the innovators phase.  In fact, one big innovation in the future may help push Bitcoin into the early adoption phase.

Lightning Network

Although Bitcoin took the world by storm in 2017, one big problem has always loomed large; scalability.  The ability to scale to the required size was a concern when Bitcoin was first introduced to the world and it remains a problem that needs to be addressed.  What does scalability entail?  Well, let’s look at the visual below.

At present, Bitcoin is only capable of processing approximately 7 transactions per second.  Compared to PayPal, Ripple, and especially Visa, Bitcoin needs to improve dramatically.  One way that Bitcoin may be able to perform significantly better is through the lightning network.

It’s currently estimated that the lightning network will have the potential to process 1 million transactions per second.  While that sounds great on paper, it’s still just theoretical.  Once the network becomes operational, its true greatness will be determined.

Conclusion

Although Bitcoin has had a rough 2018, it’s important to recognize that the future still burns bright.  Bitcoin is still in the innovators phase of adoption.  And while the lightning network is set to address Bitcoin’s biggest hurdle, better days are ahead.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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