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What investors need to know about Coin Sets, a mutual fund approach to cryptocurrencies

Days after the debut of a bitcoin futures ETF, another crypto investment vehicle with a better risk-reward ratio goes live.

An investment vehicle by Mudrex, a US-based crypto asset management platform, will offer retail investors a chance to invest in cryptocurrencies in the style of mutual funds, according to a report by Economic Times. The newly-launched ‘Coin Sets’ will allow investors to invest in a basket of crypto tokens based on different themes, the report added.

With this option, investors will be able to diversify their crypto assets portfolio by investing in baskets they believe will augment their wealth, Cointelegraph reported. For example, the coin set named ‘DeFi 10’ will include top 10 DeFi tokens whereas the ‘NFT’ coin set will be a basket of the top NFT projects, the report explained.

These baskets will be created and curated by experts from the Mudrex team. It will take care of fund allocation, weightage, order execution, and periodic rebalancing as well, as per ET.

The array of financial instruments being announced for cryptocurrencies is a signal of maturing crypto markets. It is of note that this is the first time that such a product has been launched for retail investors as they were earlier accessible only to high net-worth individuals and institutional investors.

A closer look at the idea behind Coin Sets and Mudrex

With this product, investors will be able to distribute their risk exposure in a volatile marketplace, Cointelegraph explained. The ability will allow investors to bet on the value proposition of an entire sector, rather than the individual potential of a single asset just like we get to see in mutual funds.

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The rebalancing of baskets will be undertaken on a monthly basis to recalculate the risk and opportunity for investors, Cointelegraph added.

It is a mutual fund-like product with a better risk-reward ratio, curated suitably for investors who look at crypto investments as a long-term wealth creation option. — CEO and co-founder of Mudrex Edul Patel was quoted as saying.

Patel said that their offering also encourages a self-assembling approach to portfolio creation. He informed that one of India’s largest portfolio management systems, MintingM, has utilised the model for their flagship product xMINT. “[…]we have enabled pro traders/creators and influencers to build their own Coin Sets and distribute it to their own communities to unlock wealth creation for them,” Patel told Cointelegraph. 

Mudrex was launched in January 2018 and is based out of  San Francisco. Cointelegraph reported that the company has over 40,000 users spread across 90 countries and manages assets in excess of $15 million. The firm recently raised $2.5 million funding from Nexus Venture Partners, Village Global, Kunal Shah, and others.

What is the difference between Bitcoin ETF and Coin Sets? 

Coin Sets is not to be confused with Bitcoin futures ETF (exchange traded fund) launching this week. The product will track bitcoin futures contracts instead of the price of bitcoin directly.

The filing for the ETF was done under mutual fund rules because the rules provide significant investor protections but the ETF is not a mutual fund as it will only track the index of bitcoin futures whereas mutual funds require an assortment of stocks or tokens in this case. 

Moreover, the price of an ETF’s shares changes throughout the trading day as the shares are bought and sold on the market. This separates them from mutual funds which are traded only once per day after the markets close and not on an exchange.

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