Leading U.S. cryptocurrency exchange Coinbase is reportedly considering killing off a cryptocurrency index fund product it launched earlier in the year, due to a lack of interest from accredited institutional investors, and it could be the reason key executives are exiting the company for greener pastures.
Back in March, the Coinbase Asset Management team announced the Coinbase Index Fund. While the initial buzz around the announcement was strong, the cryptocurrency market’s continued decline apparently spoiled the product’s June launch, and has only seen lackluster interest since. This is according to information provided to The Block from an anonymous source “with direct knowledge of the situation.”
The Coinbase Index Fund offered accredited institutional investors an easy way to invest in a fund consisting of all the different crypto assets Coinbase currently offers on its platforms, weighted by market cap. Investments range from a $250,000 minimum buy in all the way to a staggering $20 million invested.
The Block’s source says that the product suffered from a severe lack of interest, driving far less revenue for Coinbase than they had been anticipating. Coinbase had expected better performance, driven by a “strong demand from institutional and high-net-worth individuals.”
Coinbase has spent much of 2018 preparing for the influx of institutional investors that still has yet to happen in a meaningful way that directly impacts cryptocurrency prices. In addition to the Coinbase Index Fund, the San Francisco-based exchange has also released other products and tools for institutional investors, including a Custody product.
Coinbase has repeatedly failed to garner interest from institutional investors, which may be causing key executives to jump ship to work on platforms that are more interesting to institutional money. Coinbase’s fifth employee ever, Adam White, vice president and general manager, this past week exited Coinbase to join Intercontinental Exchange’s (ICE) Bakkt – a crypto “on-ramp for institutions, merchants, and consumers,” from the parent company that operates the New York Stock Exchange.
Given ICE’s experience around traditional markets, institutional investors are much more likely to work with a firm like Bakkt than a Coinbase that has long made its mark from interest from retail investors. Retail investor’s FOMO is largely credited for driving Bitcoin’s parabola in late December 2017. Coinbase continues to corner the retail market, and was recently valued at $8 billion.
Instead of institutional investors, Coinbase appears to be pivoting back to focusing on the retail space. Last month, Coinbase launched the Coinbase Bundle – a cryptocurrency index-liked fund weighted by market cap, similar to the Coinbase Index Fund, but with a minimum buy in of just $25. The new product takes the guesswork out of cryptocurrency investing, all without the $250,000 minimum investment.
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