Friday, October 12, 2018 12.36PM / by Frank Chaparro of
Coinbase, the cryptocurrency exchange operator, is shutting down its index-fund as it shifts attention to a new retail offering, a person familiar with the situation told The Block.
The poster-child of the cryptocurrency market in the U.S., Coinbase in March announced its aspirations to launch a market-value-weighted index fund to offer accredited investors and institutions exposure to the digital currencies trading on its exchange.
A person familiar with the matter said the index fund product failed to attract the necessary number of clients, raising less funds than the firm expected. At the time of launch, however, an executive at the firm told Bloomberg News that the company was “seeing strong demand from institutional and high-net-worth individuals.”
The number of index providers has grown in 2018, despite the cryptocurrency market’s shrinking size. Other players in the index market include Bitwise Asset Management, Abra, and Mike Novogratz’s Galaxy Digital. The shutting of the Coinbase fund could be an indication that the appetite for exposure to the crypto market is less than it was earlier this year.
As for Coinbase, it is shifting its focus to a new feature dubbed “Coinbase Bundle,” which allows users to purchase in one click a bundle of the coins listed on their exchange. The retail-aimed product allows users to invest as little as $25 in the basket of coins. It launched at the end of September. It isn’t the first crypto basket product available, to be sure.
The team at Circle launched , which allows an investor to buy 11 different tokens in a single investment — with an even lower minimum of $10. Circle Invest has , though it isn’t especially popular, ranking #734 in finance app, according to App Annie. Unlike an index fund, retail products like Coinbase Bundle don’t offer rebalancing and have fixed methodologies.
Coinbase is known for its broad crypto business, which covers trading, institutional and retail brokerage, and venture capital. Still, it makes sense the firm is focusing on retail, as that is where it got its start with its original brokerage product. It has amassed more than 20 million users. However, active users on the platform are down by 80%, as reported Thursday.
Aside from the index fund, Coinbase has other ambitions to target wealthier and institutional clients and has brought on the talent to execute on them. Recently, the firm announced starting next year Instinet CEO Jonathan Kellner will lead institutional sales and support. Kellner will play a role in building out an over-the-counter trading business for the firm, following the lead of rivals Kraken, itBit, and Gemini.
As previously reported, the firm is looking to hire 100 people to build out its New York office aimed at luring Wall Street firms to the crypto markets.
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