When it was first launched four months back, the Coinbase Index Fund was seen to be offering a big break for accredited institutional investors in the U.S. to make balanced investments in cryptocurrency assets.
However, from just June to October, the scenario appears to have altered and Coinbase has now decided to focus more on the retail investment space and remove the index fund from its portfolio of investment options to its customers.
On the face of it, poor response to the investment scheme is said to be the reason for closing down the fund.
Coinbase Had to Make Many Changes to the Fund
At the time of its launch back in June, the Coinbase Index Fund invited investors with a minimum commitment of $250,000 and a maximum of $20 million and was positioned as something equivalent to the S&P 500 index fund in the mainstream financial market, but with the different cryptocurrencies as the underlying assets reflecting the index.
To begin with, the index fund product did seem to be doing well, performing at levels higher than some of the other peer indexes. But one major grouse the investors had was the management fee, which was 2 percent. Coinbase later reduced it to 1 percent per year.
The coverage of the different currencies within the index was raised as an issue too. Again, Coinbase responded positively by expanding the assets included in the index.
While the company claimed that the response to the index fund was good, the exit of a senior executive handling the fund created some doubts.
Now, there is confirmation that the fund will be discontinued within such a short span.
Retail Investors the New Focus
As indicated, Coinbase has ostensibly shifted its focus to attract retail investors into making their bets on a basket of cryptocurrencies which has been given the name Coinbase Bundle.
It is being promoted as a “mini-fund,” meaning lower stakes in the amount of minimum and maximum investments as compared to the index fund.
The minimum here is as low as $25. According to market observers, the idea behind this fund is to service investors who might not have any experience in investing in cryptocurrencies.
Some Questions on its Credibility as Well
There are other independent reports in the media claiming that even this retail foray may not receive the kind of support from the investing community that Coinbase expects.
The reason for this is many of them might have suffered heavy losses during the Bitcoin crash in the first quarter of this year, and there has been an overall slump seen in the cryptocurrency market.
According to one of these reports, Coinbase has experienced an 80 percent decrease in active users on the platform.
Financial investments, either by individuals or institutions, follow a certain pattern and though speculation plays a role, there are some well-researched decisions made as well.