For anyone that is interested, you can find the project here: www.hodlbot.io
I'm about 1-2 weeks from the MVP launch. Only the top 20 coins by market cap fund will be available at the start. In the future users will be able to create their own custom weightings.
The bot requires users to have a Binance account and uses their API key (trade only, no withdrawal access), to execute monthly rebalances. Users will always own their own coins.
At this point, I haven't run into any huge issues with min trading amounts given a reasonable initial investment amount (~0.5 ETH). For example, the NEO example you mentioned.... the min trading amount on Binnace is actually 0.01 NEO (~$1.1 USD).
I'll be making the project open source in the future and sharing with you all!
I really wish I could just freely use this as a tool for investment, but the laws seem pretty draconian right now, and not reflective of the open and experimental nature of this space.
Once you get this up and going, consider some reporting tools to help keep track of the transactions, so people can use it for both personal and legal purposes.
What am I missing?
Even the more legitimate exchanges in the US (ex: Coinbase) aren't currently providing these types of records. You may be able to export a list of trades, but often cost basis is missing. Or if, for example, you've moved coins through various exchanges, or traded one coin for another coin (say BTC to ETH), before converting back to fiat currency, it's very difficult to figure out how to report everything. There's no 1099-B.
> Users will always own their own coins.
To be fair, users do not actually own the coins if Binance owns the coins.
Sounds like a cool bot though, and great looking site! I signed up for the private beta. Looking forward to the open source!
There is a certain benefit of using coinbase's (or any) crypto fund where you don't actually have to own the coins, and that is not having to deal with the tax nightmare situation that creates.
One request: Could you lower the monthly fee for people like me who are from India like in the range of $1 to $5 per month. $15 is a large figure for Indian common citizens.
Looking forward to it! If only I wasn't 15k in line :D
1. Log into Coinbase
2. Buy [BTC, ETH, BCC, LTC] with [62%, 27%, 7%, 4%] weights
3. Check back in one year and rebalance
That's it! As an added bonus, you just avoided 2% fees and can "redeem" anytime.
Dunno if an unused payment channel means more than stuff like that.
(is it just me or is HN becoming more unreadable due to increased usage of slang?)
I came up with some more they do for 2%/y:
* Buy more coins when their fund expands
* Secure the shit out of those private keys
It don't begrudge Coinbase's handling of bitcoin cash, because it's legitimately expensive to hook a new currency up to their framework, and nobody should be able to force them to do that just by declaring a new currency based on bitcoin.
BUT, everyone should recognize that part of Coinbase's business model is retaining all the privileges associated with holding private keys -- including choices about how to handle spin-offs, secondary services such as account mixing, and so-on.
It's pretty common to derive value from holding on to someone else's cash, so in other products (like bank accounts) some of that value comes back to you as interest, or at least offsets other service fees. Coinbase Asset Management seems to be targeting minimal services, maximum float capture, and maximum fees all at the same time.
determination of value for forks should be made by us. the point is that it's free money, that an exchange could well be pocketing for itself.
Well I hope they are doing that already.
Initial coin buy is part of those 4 / yr.
Are they insured for 100% of the value of the coins on those private keys?
If not, you are paying 2% YoY + X%, where X% is your counterparty risk - the odds that someone at Coinbase fucks up, and your money is irreversibly gone.
Currently they have insurance on their hot wallet coins, which I think is about 5% of the total. The cold wallets aren't insured, but they're paper wallets held in safe deposit boxes all over the world, so it's unlikely that a large percentage would be lost.
Another consideration specific to cryptocurrencies like Bitcoin is the relatively high transaction fee. You don't want to see your investments be whittled away by frequent transaction fees doing unnecessary rebalances. I haven't spent enough time researching cryptocurrencies to know how all these considerations shake out when it comes to this specific index fund, but as a pure gut instinct the annual rebalancing was less frequent than I would have expected from this type of fund.
([1] For the not-your-keys-not-your-coins crowd: if you don't trust Coinbase with the coins, you can't trust it with the fund either.)
I mean if the current price of BTC is $10,500, buying $10m worth of BTC will drive up the price as they're doing it. So how can you rebalance accurately if you're affecting the price of these cryptocurrencies while you do it?
Or do they just do like a "best guess" and overbuy a little and then sell off to get the balance right? I guess any index fund would have this issue, though.
For example, several coins (like Neo and Ripple) have supplies that grow and are centrally controlled, but many coins have planned inflation schedules. We know that the supply of many of the large-cap coins is going to grow over the next couple of years, and that needs to be taken into consideration when valuing them.
To explain why that is important: if people buy a coin at a certain price _knowing_ that a certain amount of inflation is going to happen, that means investors think that the market cap of the coin is actually much more (think of this like Discounted Cash Flow). Restated, if people buy these coins knowing that the supply is actually going up, that means that they think that the value of the coin is actually much higher than the current market cap.
If you want to learn more about indexing methodologies for cryptocurrencies, you should check out our website: https://www.bitwiseinvestments.com/index
This thing is rebalanced only once a year. Would take 5 minutes to actually duplicate this fund since it's only 4 coins....
For many people that is worth 2%
For what is pretty much a passively managed fund it seems hard to justify such a high fee.
You can get the overall market cap and percentages based on something like Coinmarketcap and then just set limit orders to buy/sell rounded to nearest coin requirement.
Why do you say this? (The part I added in bracket part is unambiguous in your sentence.)
Coinbase doesn't have its own coin, for example. (That is the main thing that I would think would make someone "not neutral".)
Can you explain your thinking, or tell me what facts I'm missing?
... On the blockchain?
I suppose you mean the pointers to which users controls what, in the internal db? Ie: straight up fraud. I'm not convinced having access to a large order lists doesn't already open the door to insider trading?
The index is market capitalization weighted. "The market capitalization of each constituent asset is calculated as the price of the asset multiplied by the supply of the asset" [1], where the "price for each constituent asset is the last trade price on the GDAX USD order book" (2.6).
The market capitalization, and thus weighting schema, is an entirely internal product of Coinbase's data.
> I'm not convinced having access to a large order lists doesn't already open the door to insider trading?
Currently, an insider could (a) give their orders better execution than the market or (b) foment a spike/crash by "painting the tape". This is risky and leaves a paper trail.
"The Coinbase Index Committee consists of one member representing Coinbase, and two unaffiliated independent members who have experience in index creation and oversight" (7.4). Those people are powerful. They can take economically-significant actions based on their subjective determinations. Convincing one of them to (a) tell you how they're rebalancing or what assets they're adding/removing when or (b) rebalance in a way that helps your portfolio can be done entirely over a glass of beer. Still risky and illegal. But less detectable than before.
This structure of incentives (small group of subjective decision makers operating on the basis of internal data) historically fails. (See the Libor scandals [2], where we only nailed those involved because they coördinated over instant messages.) Even if the first batch of three are honest, all it takes is one bad apple to spoil the bunch.
[1] https://am.coinbase.com/documents/cbi-methodology.pdf § 2.4
"Crypto20 is a tokenized, closed-end index fund (CEF) which passively tracks the top twenty cryptocurrency assets by market capitalisation. All profits are reinvested into the fund."
Here is the link to the whitepaper for those interested: https://static.crypto20.com/pdf/c20-whitepaper.pdf
"The liquidation option offers a price floor protection – this ensures the price never drops below that of the underlying assets because of market manipulation. Prices are, however, free to increase as speculative value is created by the high demand for a low-cost, diversified and automated cryptocurrency portfolio that can be held as a single token"
A unit of Crypto20 can be trading at a premium to the actual underlying assets.
I didn't know an index fund was just a bundle of stocks.
Anything less and you either have to leave NEO out entirely or you have to still have the minimum of 1, which will be a larger share of your holdings than its relative market cap.
However, I would not buy this fund from Coinbase since they are not a neutral player, and the market is not regulated yet. There are still great advantages in owning coins yourself - I expect that, as an average investor, I will certainly be prone to manipulation in some way. Alas, the greatest gains are probably long-since gone. No risk, no reward.