[slg]

Yeah, this is an index of 4 securities and is rebalanced annually. Coinbase is charging a 2% fee for what amounts to automating a max of 4 transactions a year. I get that people are excited about cryptocurrencies becoming available in more traditional investment vehicles, but this particular index fund seems almost completely unnecessary.

[cies]

> Coinbase is charging a 2% fee for what amounts to automating a max of 4 transactions a year.

I came up with some more they do for 2%/y:

* Buy more coins when their fund expands

* Secure the shit out of those private keys

[evrydayhustling]

Besides the fact that it should cost nothing like 2% of AUM / year, securing the private keys pays for itself when they claim every fork/spin-off coin that distributes based on bitcoin blockchain.

[e12e]

Are you saying coinage handling bcc in a sane manner is the exception, not the rule? Are there any other forks that have enough value/liquidity that they should be "given back" to the buyers?

[evrydayhustling]

The other fork people mention in this category is Bitcoin Gold, which traded as high as 10% of bitcoin but is now around 1%. There are other spin-offs but I can't easily track them -- great idea for a monitor website!

It don't begrudge Coinbase's handling of bitcoin cash, because it's legitimately expensive to hook a new currency up to their framework, and nobody should be able to force them to do that just by declaring a new currency based on bitcoin.

BUT, everyone should recognize that part of Coinbase's business model is retaining all the privileges associated with holding private keys -- including choices about how to handle spin-offs, secondary services such as account mixing, and so-on.

It's pretty common to derive value from holding on to someone else's cash, so in other products (like bank accounts) some of that value comes back to you as interest, or at least offsets other service fees. Coinbase Asset Management seems to be targeting minimal services, maximum float capture, and maximum fees all at the same time.

[dajohnson89]

coinbase's handling of Bitcoin cash was far from sane. in fact it was generally understood to be a shitshow.

determination of value for forks should be made by us. the point is that it's free money, that an exchange could well be pocketing for itself.

[daveguy]

> Secure the shit out of those private keys

Well I hope they are doing that already.

Initial coin buy is part of those 4 / yr.

[vkou]

* Secure the shit out of those private keys

Are they insured for 100% of the value of the coins on those private keys?

If not, you are paying 2% YoY + X%, where X% is your counterparty risk - the odds that someone at Coinbase fucks up, and your money is irreversibly gone.

[DennisP]

That's a good question. If the answer is "yes" then maybe that's the reason for the high fee.

Currently they have insurance on their hot wallet coins, which I think is about 5% of the total. The cold wallets aren't insured, but they're paper wallets held in safe deposit boxes all over the world, so it's unlikely that a large percentage would be lost.

[froindt]

I'm admittedly not up on rebalancing policies. With a fund of highly volatile assets, would rebalancing more frequently be necessary? I'm not thinking daily, but perhaps every month or so?

[nwellnhof]

A fund weighted by market cap doesn't have to be rebalanced. With crypto assets, you only have to adjust for newly mined coins. The Bitcoin supply, for example, is currently growing at about 4% per year. But if the other currencies in the Coinbase Index are mined at a similar rate, yearly rebalancing should be accurate enough.

[slg]

Yes, at the most general level highly volatile assets should be rebalanced more frequently. However, that isn't going to be a universal rule. It will depend on what is causing the volatility and whether that is more a product of the market or something specific related to the assets. Rebalancing too frequently is also a very real possibility so more is not always better.

Another consideration specific to cryptocurrencies like Bitcoin is the relatively high transaction fee. You don't want to see your investments be whittled away by frequent transaction fees doing unnecessary rebalances. I haven't spent enough time researching cryptocurrencies to know how all these considerations shake out when it comes to this specific index fund, but as a pure gut instinct the annual rebalancing was less frequent than I would have expected from this type of fund.

[proofofmoon]

Rebalancing cryptoassets on the same exchange (without withdrawing to a wallet [1]) doesn't require on-chain transactions. The fee would be the order fill fee, which for GDAX is 0-0.25%, much less than 2% of the account balance.

([1] For the not-your-keys-not-your-coins crowd: if you don't trust Coinbase with the coins, you can't trust it with the fund either.)

[the_gastropod]

The point of market cap weighting is that rebalancing is mostly unnecessary. The only events that require a rebalance is when a coin is added or removed from the index.

[solarkraft]

I believe so. The worth of your portfolio is the worth of the assets. Bitcoin dropped a ton in even a month. There are still changes of a few percent possible in less than a day, so yearly balancing sounds insanely dumb to me.

[ericd]

Index funds are usually market cap weighted, so day to day changes in value don't require rebalancing, since if a security suddenly doubles, its market cap does too, and it's therefore still held in the correct proportion to the other securities in the index.

[moduspol]

But they can't necessarily make those transactions easily with a ton of money in the fund, right?

I mean if the current price of BTC is $10,500, buying $10m worth of BTC will drive up the price as they're doing it. So how can you rebalance accurately if you're affecting the price of these cryptocurrencies while you do it?

Or do they just do like a "best guess" and overbuy a little and then sell off to get the balance right? I guess any index fund would have this issue, though.

[pazimzadeh]

The legal text says: "This announcement [...] is not an offer to sell or a solicitation of an offer to purchase interests in any fund or investment vehicle.