Interest Grows Among U.S. Investment Managers for Approval to Invest in Cryptocurrency Index Funds
Recent filings suggest that the concept of investing in cryptocurrency index funds is gaining traction. Hashdex, for example, submitted an updated registration filing (S-1) with the U.S. Securities and Exchange Commission (SEC) on October 1st, after the agency requested additional time to review the initial application for its cryptocurrency index exchange-traded fund (ETF).
Another asset management firm, Franklin Templeton, is also looking to introduce a similar product that will track the performance of Bitcoin and Ethereum. Their registration statement (S-1) was filed in mid-August of this year.
The SEC received a proposed rule change (19b 4) from the Chicago Board Options Exchange (Cboe) on October 2nd regarding the same matter. Approval from the SEC is required before these index ETFs can be traded, signaling a growing interest among asset managers to promote investment in cryptocurrency index funds.
Reasons for Considering Cryptocurrency Index Funds
While there are already several multi-coin cryptocurrency indices available, they are typically restricted to accredited investors in the U.S. For instance, the Bitwise 10 Crypto Index Fund (BITW) monitors the performance of 10 different cryptocurrencies, including Bitcoin, Ethereum, and Solana.
Currently, accredited investors can access such funds through private exchanges and over-the-counter (OTC) markets. Approval of applications by Hashdex and Franklin Templeton would potentially make these cryptocurrency indices accessible through major public exchanges like the NYSE or Nasdaq.
Cryptocurrency indices offer diversification benefits, allowing investors to gain exposure to a variety of digital assets without being overly concerned about the volatility or performance of individual tokens. This strategy mirrors investing in traditional market indices like the S&P 500, which diversifies risk across a basket of top U.S. stocks.
Julien Vallet, CEO of Finst, a Netherlands-based cryptocurrency firm, recently reported that 30% of the firm’s retail and institutional investors were interested in diversifying their portfolios through cryptocurrency index ETFs.
Aside from diversification advantages, cryptocurrency indices simplify operational aspects related to liquidity and regulatory compliance, streamlining the investment process in digital assets. Following the approval of Ethereum ETFs, Nate Geraci from ETF Store had predicted the rise of cryptocurrency index ETFs and actively managed cryptocurrency ETFs, a trend that now appears to be materializing.
This shift would solidify digital assets’ position as a viable alternative investment asset class, demonstrating the growing interest among investors and asset managers in the cryptocurrency market.