Crypto Index Investing Gains Momentum as Asset Managers Seek to Drive More ETF Products

Crypto index investing seems to be gaining momentum based on recent filings from potential issuers. On the 1st of October, Hashdex submitted an amended registration filing (S-1) with the U.S. SEC after the agency requested more time to review its crypto index ETF's initial application.

Recent filings from potential issuers suggest that crypto index investing is gaining momentum.

On October 1, Hashdex submitted an amended registration filing (S-1) with the U.S. SEC after the agency requested more time to review its crypto index ETF’s initial application.

Hashdex, a crypto asset manager, is seeking approval from the SEC to launch a crypto index ETF. The ETF will track an index of the top 10 cryptocurrencies by market capitalization, and it will be listed on the NYSE Arca exchange.

This is the second attempt by Hashdex to launch a crypto index ETF. In March, the SEC rejected the company’s initial application, arguing that the underlying crypto index was not sufficiently transparent or liquid.

Hashdex has since made changes to the index in an effort to address the SEC’s concerns. The amended registration filing includes a new index methodology and a detailed analysis of the index’s performance.

The SEC is now reviewing the amended registration filing. If it is approved, the Hashdex crypto index ETF will be the first of its kind to launch in the United States.

Another asset manager, Franklin Templeton, is also seeking to offer a similar product that tracks Bitcoin and Ethereum.

It filed an S-1, a registration statement, with the regular in mid-August.

On October 2, the SEC also received a proposed rule change (19b 4) on the same from the Chicago Board Options Exchange (Cboe). The regulator must sign off on these two forms before the index ETF begins trading.

Put differently, asset managers wish to drive more crypto index ETF investing.

For context, as opposed to single-asset ETFs, like the approved spot Bitcoin [BTC] and Ethereum [ETH] ETFs, an index ETF offers exposure to more than one asset.

Several multi-coin crypto indices are already available, but they are only open to accredited investors in the U.S.

For example, the Bitwise 10 Crypto Index Fund (BITW) tracks 10 different coins, including BTC, ETH, and SOL.

The accredited investors can access them through private exchanges and OTC (over-the-counter) markets.

If approved, the Hashdex and Franklin Templeton applications would allow some crypto indices to be accessible through public exchanges like NYSE or Nasdaq.

It’s worth noting that Hashdex already has an approved crypto index ETF in Brazil and aims to replicate it in the U.S.

The value of crypto indices lies in their diversification approach. They allow investors to have exposure to numerous digital assets without worrying about the volatility or performance of a single token.

It’s like investing in the S&P 500 index, which tracks a basket of top U.S. stocks without relying on one stock results.

On his part, Julien Vallet, CEO of Netherlands-based crypto firm Finst, recently noted that 30% of the firm’s retail and institutional investors sought diversification through crypto index ETFs.

Apart from diversification, the indices also reduce operation complexity linked to liquidity, regulators, etc., associated with digital assets.

In July, just after the approval of spot ETH ETFs, Nate Geraci of ETF Store predicted that crypto index ETFs and actively managed crypto ETFs would be the next thing.

His projection seems to be unfolding. This would further reinforce digital assets’ position as an alternative investment class.

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