Coinbase Launches COIN50

In 1976, Vanguard created the first S&P500 investment vehicle. And while it took over 20 years for passive funds to catch on, they now have nearly $6 trillion invested in them.

To put that in context, the total market capitalization (even with the recent price run-up) for all cryptoassets is only $3 trillion.

And while bitcoin and ethereum dominate the market cap – at 60% and 13%, respectively – one would expect these two assets to slowly lose their relative dominance over time.

Still, when most investors consider crypto an investment class or benchmark, they primarily compare it to BTC and ETH.

However, as the market cap for all of crypto grows, new projects are launched, and as institutional investors become more involved in the space, using Bitcoin as the only benchmark becomes untenable.

That’s why Coinbase, in partnership with MarketVector, has introduced the Coinbase 50 Index (COIN50), a crypto-focused benchmark that the companies hope will be the industry standard.

Here’s How it Works

Coinbase has taken the thousands of potential tokens and narrowed them down based on certain fundamental factors.

• Security: Only assets with no known security vulnerabilities, potential 51% attacks, or other factors, are allowed.

• Token Economics: No stablecoins or pegged assets. Most of the tokens supply needs to be in circulation.

• Blockchain Architecture: Must be a public blockchain.

Coinbase is quick to point out that with these rules, protocols like Terra Luna (LUNA) and FTX’s native token (FTT) – which both spectacularly failed – would have been excluded from COIN50 based on these rules.

Lastly, the index has a cap of 50% for any single token. With Bitcoin representing nearly 60% of total crypto market cap, this means that the other 10% will be distributed proportionally among the other index components.

This is different than say the Bitwise 10 Crypto Index Fund (BITW), which is limited to 10 assets and has no cap on asset percentage (bitcoin represents 75% of BITW).

Can You Trade COIN50?

Like most innovative things in this god-forsaken country, retail investors in the U.S. are not allowed to trade COIN50.

As of yesterday, only eligible Coinbase International Exchange or Coinbase Advanced investors can trade COIN50 as a perpetual futures contract (COIN50-PERP) with up to 20x leverage.

However, we should expect new ways to trade the index soon.

Why It Matters

For most of the retail investor community, keeping up to date with anything more than Bitcoin is a chore. While investor’s hear about the latest smart contract play, DeFi protocol, or memecoin, taking a risk on a random one is just that – a risk.

But with a tradable index like COIN50, investors would be able to get exposure to a large swath of the crypto industry in a diversified fashion much like the S&P or NASDAQ.

COIN50 investors wouldn’t have to:

• Worry whether SOL or ETH is going to be a winner...

• Keep up to date on the latest market category to emerge...

• Be reliant on whether Elon Musk or Donald Trump uttered a sentence with the word DOGE in it, causing the asset to spike 100% overnight…

What Gets Us Excited

In the future, it may just be possible for an tradable index based on COIN50 to offer yield on the investment.

Because Coinbase currently offers yield on seven of the 50 assets in the index, there could be a day when investors are able to hold a diversified basket of digital assets that pay a dividend that could be taken or re-invested.

Your writers at CoinSnacks crunched the numbers. By our account, COIN50 would currently have a 1.1% yield. The S&P 500 yield by comparison is currently 1.2% – the lowest in more than 20 years.