Crypto Investment Baskets: Diversification Made Easy

Basket is a collection of digital currencies, managed as a single asset, used in the cryptocurrency space.

What is basket?

A basket used in the cryptocurrency space refers to a collection of digital currencies managed as a single asset, minimizing the need for holders to constantly monitor individual currencies. A cryptocurrency basket is also used interchangeably with a crypto-index fund.

Crypto-asset baskets gained momentum in 2018 – it started by allowing multiple coins to be combined and offering a single token to facilitate trading. Putting the token on an exchange allows users to trade it like a regular cryptocurrency.

Although the product was originally aimed at novice traders, it now includes options for experienced users. Specifically, the Coinbase Index Fund is aimed at large crypto investors and consists of leading coins such as Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH) and Litecoin (LTC).

Depending on the underlying theme, the basket can take many forms. It can, for example, include all the best Proof-of-Work (PoW) or Proof-of-Stake (PoS) cryptocurrencies, respectively. Some may combine ERC-20 tokens targeting a particular subsection, such as decentralized finance (DeFi).

Other crypto-index funds, such as JPMorgan Cryptocurrency Exposure Basket, take a different approach. Although it does not directly collect a group of coins, it tracks the stocks of several companies that interact with cryptocurrency. The basket includes companies such as Microstrategy, Nvidia, Riot Blockchain and Square.

Remarkably, the assets in the basket can have different percentages, with the lions share of one or a couple of assets.

In JPMorgan’s case, Microstrategy has 20%, Nvidia has 15%, and Riot Blockchain has 18%.