With the demand for cryptocurrency trading increasing exponentially and the global market cap of cryptocurrencies reaching over $100bn, eToro, the popular social trading and investing network, launched its Crypto CopyFund earlier this month.
eToro Crypto CopyFund Methodology
The CopyFund offers investors a balanced exposure to six of the most popular cryptocurrencies currently available. As well as popular cryptos Bitcoin and Ethereum, both available to trade individually on the eToro platform, you will now be able to gain exposure to DASH, LiteCoin, Ripple and Ethereum Classic via the CopyFund as well.
To be included, a cryptocurrency needs to have a minimum market cap of $1 billion and a minimum average monthly trading volume of $20 million. The weight of the cryptocurrencies in the CopyFund is based on market cap, with a minimum of 5%. If one of the cryptocurrencies market cap falls below $1 billion or their monthly trading volume drops below $20 million, they will be excluded from the CopyFund.
The Crypto CopyFund is regularly analysed and automatically rebalanced by eToro’s investment committee on the first trading day of each month.
The minimum investment in this Crypto CopyFund, as well as eToro’s other CopyFunds, is $5,000. There is however a daily limit set on how much can be newly invested in the CopyFund. When this limit is reached, it will be closed for new investors, but re-opened the next day. You can however close your investment in the Crypto CopyFund at any time during trading hours.
Please don’t confuse this with a traditional professionally managed asset fund. The eToro Crypto CopyFund follows a strategy (in the case going long on cryptocurrencies) and when you invest you’re basically copying this strategy.
What Yoni Assia, Co-founder and CEO of eToro, said:
“2017 has been a defining year for cryptocurrencies. The global market has now topped $100 billion and the last few months alone have seen an influx of new cryptos entering the space.
We believe that $100B is a milestone on the way to a Trillion USD market cap, and that a good strategy to capture this growth is by simply investing in the top billion dollar cryptocurrencies on a market cap weighted average.
As the popularity of the market grows, and more investors are learning about its potential, we want to ensure that our clients have as much access to it as possible. Investing in the top cryptocurrencies is an extremely complex process today, it requires technical, security and risk management knowledge to buy and hold these new digital assets, at eToro we are simplifying this process to a click of a button.
This CopyFund is the first of its kind globally providing investors access to the world’s biggest digital currencies in one innovative portfolio. For those who believe in the technology’s potential, this is an opportunity to invest in a straightforward and simple way.”
eToro’s Crypto CopFund – Our Opinion
Unless you’ve been living on a deserted island over the past 6 months you’ll have become aware of the exponential rise in the value of cryptocurrencies. Where over the past few years only early speculators invested in them, these days many retail investors are jumping on the bandwagon.
Hence it’s almost a surprise that it’s taken this long for eToro to add CryptoCurrencies to their CopyFunds. I like the idea and concept and see the following key benefits:
- simplicity of transaction process
- reduced risk
Simplicity of transaction process
Anyone who’s tried to purchase Bitcoin or any of the other cryptocurrencies will know that the process isn’t simple and can be very confusing. To start with, you need to find a crypto exchange that you trust. The registration process can take days to weeks (I’m still in a queue for one particular crypto exchange for over a month). You also need to decide where and how to store your digital wallet. And when it comes to selling your coins there’s been plenty of stories of exchanges being hacked and/or suspending trading for hours or days.
If you already have a funded eToro account, it takes less than a minute to invest in their Crypto CopyFund. Opening an eToro account is also straightforward and quick (the only reservation being that they don’t accept customers from the US).
If you want to close your position you can also do this instantly during trading hours.
If you think that buying and managing one cryptocurrency is a complex process, try doing this for 6.
eToro’s Crypto CopyFund gives you direct access to a balanced portfolio of the major cryptocurrencies AND automatically rebalances the portfolio each month. In addition if new cryptocurrencies become popular (i.e. market cap reaches $1 billion) they’ll be added automatically (and hence become part of your investment portfolio).
In addition, while cryptocurrencies tend to move in the same direction, there are some significant differences in their individual gains over the past year. Unless you have a magic crystal ball, it’s impossible to predict the next big winner (or loser), so the diversified portfolio should in the long run increase the chance to benefit from the exceptional winner(s).
Bitcoin wallets can be lost, just look at the story of James Howells, who’s hard drive with over $8 million worth of bitcoins is in a Newport landfill site. When you invest with eToro on the other hand, you’re not buying any actual assets but CDFs (contract for difference). They move with the values of the underlying asset. Your actual money and risk just sits with eToro, one of the world’s leading social investing platforms.
While no one can guarantee the future of any company, eToro has been trading for over 6 years and no stories so far of cyberhacks or attacks. On the other hand as recently as 2 weeks ago, major bitcoin exchanges were hit by cyberattacks as record rally makes them a target while 45% of bitcoin exchanges end up closing according to WIRED UK.
The eToro Crypto CopyFund’s diversification also means that if one cryptocurrency would fail, you don’t lose your full investment.
The eToro CopyFund’s minimum investment amount of $5,000 may turn some people of (though consider that at the time of writing this buying one Bitcoin would cost you already $2,787 as well). However it’s worth noting that you can trade Bitcoin and Ethereum individually on eToro as well (in much smaller amounts) or copy some of their popular expert traders like Liam Davies or Jay Smith (click to open their latest stats) who’s portfolios have performed very well, focussing on cryptocurrency.
Never EVER think that because cryptocurrencies have gone up in recent years that this trend will continue. In fact their values can be highly volatile, as is the value of the eToro Crypto CopyFund as the graph below demonstrates (click here to view today’s chart).
Within a period of less than 2 months you could have made a profit of 10% or loss of 30% (FYI the CopyFund officially launched on July 12th).
In any case opinions will vary so feel free to leave yours.
* Investment products offered by eToro are contracts for differences (CFDs) which carry a high degree of risk and are not suitable for many investors. Only risk capital you’re prepared to lose. Past performance is not an indication of future results. Trading history presented is less than 5 years and may not suffice as basis for investment decision. Please note that this is not investment advice.