πŸ”₯ Invest in crypto funds 2021: buy a fund or not?

Bitpanda crypto index overview

Are you looking for one KryptowΓ€hrung, in which you then want to invest, you will notice relatively quickly that there is a tremendous variety - and just as many opinions about which crypto currencies have the potential to create a wonderful story like that Bitcoin to be able to write. Because in the end it is about paying a low price and being able to make high profits with the low investment.

Who a few years ago in the Bitcoin invested would be a millionaire today. Even if the weaknesses and strengths of the different digital currencies can be determined, there may be difficulties with the forecast - the market is always good for a surprise. And no matter how promising the forecast may be, there is no guarantee.

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Reduce the risk with a fund investment

Investing in data analysis

If you deal with financial products, you will come across the word β€œdiversification”. This means that you should by no means put your money in a single investment, but rather split your assets - this can reduce the risk. If you come to the conclusion that the selected investment does not meet your expectations, you have often lost valuable time and money. For this reason, private investors are repeatedly advised to look at index funds. Because whoever puts all of his money in a stock corporation, invests in a raw material or even spends all of his money on it Buy coins of a cryptocurrency, carries an enormously high risk. On the other hand, it is different if you invest in a fund that is made up of several stock corporations or various assets.

Traditional is a fund that is made up of stocks such as bonds and other securities. So you invest at regular intervals, buy fund units again and again at different prices and in the end enjoy - usually - a very attractive average return. If you invest in one, for example Exchange Traded Funds, i.e. in the exchange-traded index funds, the fee model is also convincing. Because here the administrative costs are in a minimal range. Actively managed funds have somewhat higher expenses here - but here, too, the fund manager operating in the background tries to beat the market.

Bitpanda crypto indexes explained

A new type of fund may be the crypto fund. That is, here is exclusively invested in digital currencies - but not in a single cryptocurrency, such as Bitcoin, but in different digital currencies such as tokens. If a crypto currency is characterized by the fact that it is exposed to extremely strong fluctuations, this "loss", which in the end often only represents a snapshot, can, however, be offset by the other coins contained in the fund. You also have to consider that there are many cryptocurrencies that are completely unknown - there is no guarantee that all digital currencies will still be available on the market in ten or 15 years. Anyone who invests in a crypto currency here, which then disappears from the screen surface, suffers a total loss. However, the entire industry may not go away - another point that speaks for the crypto fund.

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There are three ways you can invest in a crypto fund

Bitpanda crypto indices cryptocurrencies overview

It may be due to the fact that there are more and more investors who are looking for crypto currencies interest, be surprising that there is currently a very manageable range of crypto funds. Of course one can now assert that the tax regulations are still the main problem, since one would not know how one could determine profits and losses in order to then carry out a corresponding taxation. Because coins that are held for more than a year do not play a role in the tax return - if they are sold after 366 days, the profit is entirely tax-free.

Of course, it may also be the core idea that may pose a problem here. Because cryptocurrencies are decentralized - the point here is not to be held or marketed as influenced by a central institution. Self-management may be the top priority. And that is simply not possible with a fund.

Currently one can say that there are three variants for private investors who would like to put their money into a crypto fan:

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Variant 1: The provider manages the fund

The rebalancing takes place automatically, you do not need any technical know-how and you can equate the investment with classic funds. However, you don't have any coins and you have to assume that this variant also causes quite high fees.

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Variant 2: You put together your own portfolio

This is about your own weighting; you decide for yourself in which coins are invested. It may also be the easiest method when it comes to tax liability. But there is no rebalancing here and you have to be aware that it may be time-consuming to run your own fund.

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Variant 3: The bundled purchase of cryptocurrencies

In this case, reference can be made to the Bitpanda Crypto Index. Here you buy crypto currencies; the fees are lower than for classic fund management. The disadvantage? The weighting is specified.

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Bitpanda has taken on a pioneering role here

Bitpanda website and logo

Even if one might think that there could be no crypto fund at all, so has Bitpanda assumed the pioneering role here. The funds offered here are aligned to "indexes"; no active assets will be sold or added.

Bitpanda's crypto index is a real index that is secured with crypto values. There are three indices available (as of the end of May 2021), which are composed of 5, 10 or 25 digital currencies. You can also invest in one of the three crypto indices as part of a savings plan.

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The Bitpanda Crypto Index 5 is made up of five cryptocurrencies:

Bitpanda BCI5 crypto index

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The Bitpanda Crypto Index 10 is composed of 10 crypto currencies:

Bitpanda BCI10 crypto index

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The Bitpanda Crypto Index 25 is composed of 25 crypto currencies:

Bitpanda BCI25 crypto index
  • Ethereum (19,39 percent)
  • Bitcoin (17,32 percent)
  • Cardano (7,95 percent)
  • Dogecoin (7,51 percent)
  • Uniswap (4,24 percent)
  • Bitcoin Cash (4,22 percent)
  • Binance Coin (3,94 percent)
  • chainlink (3,90 percent)
  • Litecoin (3,85 percent)
  • Polkadot (3,77 percent)
  • Stellar (2,86 percent)
  • Solana (2,64 percent)
  • Theta Network (2,54 percent)
  • Vechain (2,31 percent)
  • EOS (1,93 percent)
  • Tron (1,72 percent)
  • Filecoin (1,52 percent)
  • Aave (1,36 percent)
  • Monero (1,34 percent)
  • NEO (1,29 percent)
  • Bitcoin SV (1,04 percent)
  • IOTA (0,96 percent)
  • Cosmos (0,87 percent)
  • Bit torrent (0,82 percent)
  • Terra (0,71 percent)

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EToro also offers investing in cryptocurrencies

eToro website

In addition to Bitpanda, there is also eToro yet another provider that offers crypto trading. In this case, the allocation of the cryptocurrency takes place according to the market capitalization. However, it is possible to put together your own bundle via eToro.

eToro scores with one wide variety of cryptocurrencies And above all, it is convincing because eToro not only the services of a crypto exchange provides, but is an online broker, which then also makes price speculation possible. So if you don't want to invest directly, you can speculate with the price development.

eToro markets overview

It is important that in the course of price speculation, i.e. CFD trading, you only invest money that is freely available. That means only taking capital into hand that can also be lost or less.

eToro is also convincing because of its social trading. That means you can make decisions like here Copy the strategies of successful traders and participate in their successes. However, one should not understand social trading as a guarantee of profit. A trader who has years of experience can very well be wrong and lose money.

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Conclusion: promising but not without danger

If you invest in cryptocurrencies, you run a certain risk that should not be belittled. Of course you can make attractive profits, but it is possible that the invested money suddenly becomes noticeably less.

However, due to the fact that the crypto market is forecast to gain strength over time, we find at Bitcoin-News.onethat it makes sense to consider investing some of the assets in crypto funds.

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Callie Machalat

Callie Machalat from Bitcoin-News.one understands the information needs of the crypto community members, traders, researchers and developers looking for reliable information to understand and participate in the crypto revolution.

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