Huobi, a virtual currency exchange platform with headquarters in Singapore, is planning to launch a cryptocurrency Exchange Traded Fund. ETF is an investment fund that has a basket of underlying assets it draws value from and is traded on an exchange. Huobi’s new investment instrument will be called HB10 and customers will be able to invest in it with cryptocurrencies only. No fiat money is accepted at this time.
ETFs offer several advantages to investors. Compared to investing in a single cryptocurrency, the risk with ETFs is more diversified. If the value of one underlying asset goes down, an increase in the price of another asset might offset the losses. Consequently, there is a lower risk of the instrument losing its value. In addition, ETFs are usually traded more easily than indexes, a similar instrument that draws value from a basket of assets. Increased liquidity and lower risk make ETFs a perfect option for many investors.
As representatives from Huobi emphasized, HB10 will be especially advantageous for retail and institutional investors. As a result, according to the company, HB10 will “reduce the impact of institutional entry and exit” that individual cryptocurrencies face. HB10 will replicate an existing index offered by the company – Huobi 10 Index. The index was launched recently and it tracks 10 different cryptocurrencies on Huobi Pro exchange depending on the market capitalization and liquidity.
Crypto20 offers investors diversified risk for investing in cryptocurrencies.
Some of the other ways investors can diversify and reduce risk when trading cryptocurrencies, is to invest in other existing indexes. Crypto20 was the first tokenized cryptocurrency index to offer such product. Fund portfolio currently is comprised of 12% Ethereum, 10% Bitcoin Cash, 10% Ripple, 9.5% Bitcoin 9.3% EOS and other currencies with lower shares. The fund value currently sits at over $50 million.
With growing concerns about the riskiness of cryptocurrency trading, more instruments offering diversified risks are likely to emerge. It is only natural that with lower risks there are going to be fewer stories of astonishing growths, but it might be a way to attract investors that were wary of getting involved in the cryptosphere. The interest of more institutional investors in itself will lend credibility to the system that could put the cryptocurrencies on the path of stable growth once again.