How Coinbase Plans to Make Crypto a Mainstream Investment for Millions

Coinbase, the most popular cryptocurrency trading platform in the United States, soon will launch a crypto index fund for high net worth investors only.

But the San Francisco startup has its eye on bigger game: A retail ETF available to mainstream investors. 

The index fund would grant investors the opportunity to put money into a one single fund, instead of investing into cryptocurrencies individually.

Reuben Bramanathan, a product manager for Coinbase, says that the index fund would meet growing demand from institutional investors and high networth individuals looking to start trading in cryptocurrency.

If it takes off, the introduction of institutional money would deepen the investor pool and support mass acceptance of cryptocurrencies as an investment.

“We are seeing new investors coming to the market because they see an asset that is not correlated and outperforms, but they don’t know which ones to buy,” Bramanathan said.

The index fund will be 62% Bitcoin, 27% Ethereum, 7% Bitcoin Cash, and 4% Litecoin.

The Coinbase product is not be the first crypto index fund to appear in the the market.

Bitwise Management Fund offers a crypto index fund which combines 10 cryptocurrencies weighted by market capitalization.

Investors may start signing up for the Coinbase product but the index fund will not launch for at least a couple of months and it will only be available to accredited U.S. investors.

Retail demand

The U.S. Securities and Exchange Commission points to a lengthy description of what makes an investor “accredited,” but generally speaking it means income in the past two years of $200,000 (or $300,000 as a couple) or a net worth of more than $1 million.

Pending regulatory approval, however, Coinbase could launch a similar fund for investors of any wealth or income level.

This fund likely would be organized in the form of an exchange traded fund (ETF). “We are working towards funds that will be available to all retail investors,” Bramanathan said.

“We’re expecting huge demand from retail when that’s available, and we want to be in a position to accept that demand.”

This move to offer a crypto index fund, as opposed to just being a trading platform, could turn Coinbase an asset management business. That would change its business model and dramatically change its regulatory constraints. 

Coinbase was recently valued at $1.6 billion.

The moves toward funds has led to speculation whether Coinbase will seek to provide a more extensive array of financial services, and if it might try to become a bank.

In November 2017, as the first Bitcoin boom was nearing its recent peak, Coinbase exceeded major U.S. stock brokerage Charles Schwab in number of customer accounts.