The Rise of Passive Investing: How Crypto is Evolving for Retail Investors
Most people assume that crypto’s most popular financial instruments are tokens, but index funds are gaining significant traction. In traditional finance (TradFi), index-based funds have historically outperformed single-asset funds in terms of assets under management (AUM), providing investors with diversified exposure while mitigating risk.
While crypto ETFs, particularly Bitcoin ETFs approved by the Securities and Exchange Commission (SEC) in January 2024, have dominated recent market discussions, index funds offer a broader approach to digital asset investing. Instead of relying on the performance of a single asset, index funds track baskets of assets, creating the diversification that investors have long favored in traditional markets.
In crypto, this approach holds similar potential. Instead of focusing on a single token like Bitcoin or Ethereum, index funds track multiple high-performing digital assets, offering exposure to the broader market while reducing concentration risk. The Bitwise 10 Crypto Index Fund was one of the first such crypto indexes, launched in 2017, and Fidelity and Bloomberg soon followed with its Bloomberg Galaxy Crypto Index in 2018.
As institutional adoption grows, multi-token index funds that take their unique approach to tracking, benchmarking, and reflecting the overall crypto sector could play a key role in bridging traditional investment strategies with the digital asset space.
Indexes spare the hassle – and risk – of investing in individual coins
The abundance of information about a coin – spread across white papers, discussion boards, social media platforms, and messaging apps – is difficult to keep up with for one coin, let alone the 1000s of digital assets at any given time. While ETFs save investors the inconvenience of buying, storing, and securing $BTC or other coins with forthcoming ETFs, investors must keep …
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