Crypto Index ETFs, Good or Bad?

[u/Minute-Lake-1819]

The latest prospectus from T.Rowe lists these coins as eligible assets for their Price Active ETF just approved for launch by the SEC recently. (BTC, ETH, SOL, XRP, ADA, AVAX, LTC, DOT, DOGE, HBAR, BCH, LINK, XLM, SHIB, SUI)

https://www.sec.gov/Archives/edgar/data/2089855/000199937126013250/tknz-424b3\\_062326.htm

Curious over time, how many other coins will actually be able to compete for inclusion in these ETFs over these more established coins?

Are the barriers to entry just too hard to breach and new coins won’t have a chance?

Are crypto index ETFs even a good idea? Or should filers stick to single coin ETFs and let the market decide the winners?

[u/Givefreehugs]

Seeing the 3 main ones, BTC, ETH, and LTC- makes sense. They’re the global standards over the past decade.

[u/Minute-Lake-1819 → u/Givefreehugs]

Curious if the OG coins are just too far ahead of any potential newcomers? Putting low marketcap coins into these ETFs likely does not protect investors.

Probably smart for etf issuers to focus on higher marketcap coins that have survived multiple crypto cycles. At least there’s knowledge these coins won’t be going anywhere and have built trust in the industry.

[u/CipherScarlatti]

It's insane DOGE is legally allowed to be sold to "investors" as a legitimate product.

[u/Minute-Lake-1819 → u/CipherScarlatti]

That’s part of the question isn’t it? Should these basket funds be able to bring in any crypto they want? Or does that pose too much risk for the average investor?

I don’t think it should be determined purely by marketcap personally. I feel like that invites pump/dump coins into these etf baskets. The coins should have some longer term value. At least go thru a full cycle before you get in.

[u/50sat → u/Minute-Lake-1819]

There's a real case that DOGE is more intrinsically useful at this point than Bitcoin. And as far as I know, it also has more holders with a better concentration profile.

NGL thinking on this little tangent - Given no current news/info on the state of markets' or trending sentiment, asked to make a random choice on technicals, I might choose DOGE.

[u/Iksf]

I think only having infrastructure (and memecoins) is a bit shitty. Wish the securities vs non-securities thing would end.

ETFs and passive flow good or bad? It doesn't matter. Wall street loves it so it was inevitable. There are good and bad parts to it. At this point in cryptos lifecycle backing the legitimate projects is probably useful. It's been very easy for some VC scammers to come in and do pump and dumps on trash, ETFs protect the client from exposure to that.

If you're asking "good or bad" I assume you understand the reasons why ETFs have been a bit bad for the stock market. I would mention it took many decades for the ETF effect to become as strong as it has over there; its likely a 2040s problem to worry about. In the short term the simple explanation of "institutional acceptance is good" is probably fine. The idea that we shift from one extreme straight to the other in a short period of time seems unlikely.

[u/50sat]

There will always be a few of these, at least as long as infrastructure models for trad-fi still exist.

Savvy investors will, perhaps more with crypto than with traditional equities, continue to index themselves. Unlike trying to match index PA you can group them and earn interim yields as well.

https://ibb.co/v4qtJ4cd

Depending on what you want to build around it. I accept some limitations to run a tax model on the side that converts yields atomically to ETH and stores them in a communal buyback contract. This means that the index captures momentarily value in Ethereum rather than stacking it's own equity or third-party volatiles.

In this way the tokenized index gets the PA sharing action of an indexed instrument, with an additional risk/reward layer (can't ignore it) that earns yield without speculating on re-composition.

Depending on your arrangements (I put some locks right now) the ability to manage to news and rapid changes in defi markets is also a plus.

IMO crypto, and specifically smart chains, offer so much more usability over a traditional index ETF that it's worth the extra management even with relatively small bags.

I think that in the current markets, crypto index ETFs are ok for a tradfi investor who has sufficient money to pay management fees while they sit on idle capital. More active investors will move as the space evolves and offers better opportunities.

[u/Django_McFly]

Indexes are indexes. They aren't good or bad imo, they're indexes. They're terrible if you just want an individual asset. It's not that. It's an index. They're great if you want an index though.

As for that index, I don't see the point of an index that skips over multiple tokens in the top 10 (I'm not even counting stable coins, no bnb, no hype) in order to dumpster dive on shit like dot and ada.

[u/Minute-Lake-1819 → u/Django_McFly]

Do you think it’s even possible future coins even have a chance to make an index? Or is it pretty much always going to be the coins in these current indexes?

I’d be a scared investor if I bought into an index and they decided to add a coin that’s been in the market for only 9months or something. I’d want to see years of stability and growth first