As cryptocurrencies such as bitcoin gain mainstream adoption, we can only expect to see more fintech infrastructure built around the cryptocurrency financial systems to match the level of development seen in traditional finance:
As a prime example of that, CRYPTO20 has launched a platform that enables investors to buy into a tokenized cryptocurrency portfolio that autonomously holds the top 20 cryptocurrencies determined by market cap with weekly rebalancing. The C20 fund hyperparameters were determined through extensive modelling and the application of efficient and effective data science processes in a tried and tested manner, and is clearly laid out in their whitepaper. The intention is to further streamline the onboarding of mainstream demographics who would have been otherwise overwhelmed by the level of complexity and detail involved in emergent crypto markets.
Founder Daniel Schwartzkopff recently went on Boxmining to talk about their key value propositions:
CRYPTO20 is a tokenized cryptocurrency index fund. Essentially what we allow people to do is own a diverse, rebalanced cryptocurrency portfolio in a single token… [The idea came about] when looking at different types of funds… it was fairly clear that we should establish an indexed fund, essentially for the reasons that a managed fund requires a human to make decisions and these decisions are based on technical fundamental analysis and going through vast amounts of data, etc… But the data in the cryptocurrency market currently is unfortunately too thin to support trading on those kind of methodologies.
To add my own analysis, the concept of an autonomous index fund dictated by a pre-set and publicly auditable ruleset is much better suited to attract crypto investors than an actively managed fund. In being autonomous, the ideologies that attract people to crypto are capitalized upon. That is, one is able to verify and audit the ruleset rather than trusting any one centralized entity as is the case with actively managed funds.
The presale successfully reached its minimum fund cap within hours of launching a month ago in October, whereby investors were able to secure $1.10 USD of underlying crypto assets through the representative index fund token at a price point of $0.95 USD. The main ICO is currently ongoing at a price point of $1.05 USD, and is set to rise to $1.10 USD as the end date on 12:00 midnight GMT, the 30th of November nears.
As a significant point of attraction, an investor’s ICO buy-in is not necessarily locked in and illiquid until the token is listed on an exchange. In the case of CRYPTO20, the C20 token can be liquidated for their share of underlying assets via the publicly auditable smart contract at any point in time.
The overall utility of the C20 token is not only in reducing complexity for new investors to crypto, it also circumvents the need for a centralized fund management platforms that take inordinate cuts of the investor portfolio.
Transparency in a lemon market
The level of community engagement and transparency seen by the CRYPTO20 team is certainly a positive outlier in comparison to other crowdfunding efforts Public inquiries made about platform are met in a transparent and prompt fashion - this is most prevalently seen on CRYPTO20’s subreddit.
On this point, the team had an interesting answer regarding a specific inquiry on the diversity of the index fund:
Additionally we will not hold any tokens deemed to be unethical/illegal (unethical in a sense that they are misleading their customers/investors). Currently we would not hold BitConnect although it is in the top-20 due to their questionable guaranteed returns business model that resembles a ponzi scheme and we would also not hold tether due to no opportunity of growth.
While this potentially introduces elements of centralization, and leads to the difficult questions of what constitutes as unethical/illegal, the CRYPTO20 team shows that they’re on the ball here in terms of addressing what is very clearly a suspect business model - and not allowing that to negatively influence their own investors. In correspondence with Crypto Insider, CRYPTO20 attempted to address concerns of centralization, discussing their intent to develop a DAO-like model to tackle these problems in the future.
In other media, “Why the ICO industry is terrible and how to fix it” written by the marketing platform fueling CRYPTO20 is an introspective read into the key issues with the ICO industry today: undisclosed paid shilling, asymmetry of information between outside investors and inside players and finally a capitalization on FOMO and blockchain buzzwords. The takeaway of the piece could not be more on point: “the truth is, the current ICO industry thrives off of the poorly informed”.
In sharp contrast to the issues outlined above, the CRYPTO20 team makes the extra effort to enact industry best practice in the ICO lemon market, doing so at their own cost and knowing there is no short-term gain. For example, on being prompted regarding potential counterparty risk, the team were able to produce efforts showcasing a full implementation of security best practice: their smart contract has been audited by the Hosho group with a similar audit occurring on their back-end system. In addition, the majority of funds are stored in hardware cold wallets, with only small amounts available in hot wallets to fund the liquidation process. The full security audit can be viewed here for those curious. Finally, the whitepaper can be referenced for the in-depth extrapolation of key points, from security and transparency to the index fund trading strategy.
With all the noise in the crypto space, it’s difficult for a debutante to get a grasp of the best moves to make. Understanding bitcoin and cryptocurrencies in a bullish market is one thing, taking appropriate steps to maximize your return on investment in such a market is another. If CRYPTO20 can continue to show strengths post-ICO, which is where it really matters, then there is potential here for major onboarding of mainstream demographics into cryptocurrency investments.
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