Bitwise Asset Management’s Hold 10, a cryptocurrency index fund that invests in the top 10 cryptocurrencies in the global market, has raised $4 million from former PayPal executives.
Risk Minimization
Investors including prominent venture capitalist Naval Ravikant, Keith Rabois, and former PayPal chief operating officer and product leader David acks have contributed to the $4 million investment round of Hold 10.
According to Bitwise CEO Hunter Horsley, Hold 10 is only open to accredited investors and allows its investors to allocate funds into the 10 largest cryptocurrencies in the market weighted by the value of circulating coins or market valuation.
“We and our investors believe that a vehicle like this, or passive index investing as an approach, is a great way for many people to participate in cryptocurrency,” said Horsley.
Although more than 60 percent of the funds stored in Hold 10 are invested in bitcoin, the primary purpose of the Hold 10 cryptocurrency index fund is to minimize risk and maximize profit margins for investors, rather than allocating large sums of capital into one cryptocurrency, which can be highly risky.
“Cryptocurrency is such a new and volatile asset class, it’s hard to guess how the market will play out in the future. If you use subjective judgment, you could misjudge or overlook something,” said Horsley.
Realistically, unless investors devote themselves full-time in cryptocurrency investment and researching emerging technologies in the market, it is challenging to develop a depth of knowledge in many cryptocurrencies. For instance, despite the $20 billion market valuation of Cardano, many investors are still unaware of the cryptocurrency and new to its technology.
Hence, focusing on the 10 largest cryptocurrencies in the market would encourage and motivate investors to invest in cryptocurrencies with a depth of knowledge sufficient to justify their investments and be confident in the technologies they support.
Healthy Portfolio
Prior to the fundraiser initiated by the bitcoin community in which investors in the space raised over $2 million for bitcoin and security expert Andreas Antonopoulos, it was revealed that Antonopoulos had a small portfolio of diversified assets. During a talk, Antonopoulos shared his personal investment strategy:
“I own a few different crypto assets as part of a small but diversified portfolio. I only risk as much as I’m willing to lose.”
While many investors in the cryptocurrency market still own 100 percent of their funds in bitcoin, a diversification of assets can significantly reduce risks involved, as high performing cryptocurrencies can cover the losses of assets performing sub par.
Moreover, in a separate talk, Antonopoulos noted that investors should only invest a certain amount of money in cryptocurrencies that is proportional to their understanding of the technology. Investing a large sum of money in a cryptocurrency like bitcoin and Ethereum without a proper understanding of the technologies that support the two cryptocurrencies would be reckless and financially irresponsible.