The fund, known as Bitwise HOLD 10 Private Index Fund, holds the top 10 cryptocurrencies weighted by 5-year diluted market cap and rebalanced monthly.
Assets are purchased from multiple liquidity providers, held in 100% cold storage, and audited annually. Taxes are prepared for investors.
Bitwise cryptocurrency index fund’s goal
The goal of the HOLD 10 Index is to represent the performance of the cryptocurrency market by tracking a basket of the ten largest coins. To protect the integrity of the index, significant robustness is applied through eligibility criteria, inflation adjustment of market capitalization, distinguishing circulating supply, the rebalancing policy, compositing of price data, data sources, and policies for rare events like hard forks. The Index will be evaluated and researched on a periodic basis.
How the cryptocurrencies are selected?
The HOLD 10 Index has a policy of selecting the top 10 coins, by inflation adjusted market capitalization. The selected coins are then held in proportion to their inflation adjusted market capitalization. Inflation adjusted market capitalization is calculated using the formula (composite price) x (circulating supply + additional supply publicly scheduled for next 5 years).
A coin’s composite price is derived from the real-time price data from multiple exchanges. The individual prices are combined with two techniques:
• Trade volume weighting: The price on the exchange with more trade volume has more influence on the composite price.
• Inverse price variance weighting: The exchange with the price that deviates more from the prices of the other exchanges has less influence on the composite price.
Circulating supply is the best approximation of the number of coins available to public investors. It is derived by taking the total number of existing coins from the blockchain and subtracting the number of coins verifiably burned, locked, or reserved (for example, by a foundation). In addition to circulating supply, the index incorporates supply inflation that is publicly known to the market.
Additional criteria for crypto selection
Cryptocurrencies should meet the following additional criteria to be included in the index:
• Actively traded on multiple recognized exchanges.
• Trading volume not over-concentrated on a single exchange.
• Monthly trade volume exceeding 30% of circulating supply for the past 3 months.
• Free floating price. The price should not be pegged to fiat currencies.
Hunter Horsley, previously product manager at Facebook and Instagram, is the CEO and Matt Hougan, a veteran of the exchange-traded funds (ETF) industry, is the Vice President. Bitwise develops funds, indexes, insight, and other services. The team behind Bitwise has backgrounds in technology, security, and finance.