An idea of a crypto basket was borrowed from the tried and trusted way of investing in the stock markets- Index Funds.
Similar to index funds like the S&P 500 and Nifty 50 that provide exposure to the top 500 or the top 50 companies of the U.S and the Indian markets, respectively, a crypto basket fund enables investors to diversify among multiple crypto assets.
They are a bundle of multiple crypto assets put together to allow for diversification, risk management, and hassle-free crypto investing. Depending on how a crypto basket has been curated, it can give you exposure either to multiple digital assets in the same sector or to digital assets from different sectors.
How Does a Crypto Basket Work?
Crypto baskets can be of various types depending on the theme they are based on. Various crypto platforms track the widely available crypto assets and projects and categorize them into different investment themes. This could be based on their utility, the project type, the sector they belong to, their market cap, and so on.
For instance, the Crypto Blue Chip Coin Set offered by Mudrex is a crypto basket consisting of the top 5 cryptocurrencies according to market cap. At the same time, the Metaverse Coin Set consists of the top metaverse tokens in the market.
Most crypto baskets are curated by experts who are well-versed in the space; hence investors need not actively manage their investments. Each crypto asset within the basket goes through rigorous checks and balances to ensure only the best makes it to the club.
How Does Crypto Basket Investing Work?
Like index funds, crypto baskets can be used to invest in a specific category or segment. So instead of buying 20 different crypto assets, you simply buy one basket that contains them all. For example, let’s say you are very optimistic about the future of the metaverse and its applications. It can be challenging to research all the metaverse projects and decide which ones to invest in. In such cases, you can opt for a crypto basket based on the metaverse theme. It will include crypto tokens representing the top metaverse projects, carefully vetted, researched, and curated for you to invest in. But no matter what, always DYOR.
3 Advantages of Crypto Basket Investing
Crypto basket investing can help you purchase multiple crypto assets in one click. It allows you to build up your crypto portfolio with ease.
1. Constructs a portfolio
A crypto portfolio is nothing but a collection of all the cryptocurrencies you own. It is ideal to have a portfolio that aligns with your risk appetite and investment goals.
You can automatically have a crypto portfolio constructed for you by investing in a crypto basket. There are all types of crypto baskets, from the riskiest to safest, ranging across sectors and themes.
Crypto baskets unburden you with countless hours of research required to make your crypto portfolio.
2. Helps you with diversification
A smart investor does not put all their eggs in one basket.
You get to invest in multiple digital assets of the theme you choose by investing in a crypto basket. You can either invest in a crypto basket which contains cryptos from multiple sectors. Or you can invest in a basket which offers different cryptos but in the same sector. Or do both.
For instance, if you choose a blue-chip crypto basket, a bundle of top cryptocurrencies like Bitcoin, Ethereum etc., across sectors. It minimises your risk because different sectors might have varying market volatility. Bitcoin may be down 5% one day, but Ethereum can be up by 1% on the same day.
On the other hand, you may be very bullish on NFTs and decide to invest in the NFT crypto basket. This will consist of cryptos or tokens belonging to different NFT projects. Here the idea is that you are investing in the entire sector rather than one token. Even if one of the projects from your basket performs poorly, others may offset it.
3. Auto rebalancing
Rebalancing is another important aspect where crypto baskets come in handy. It is important to maintain a well-balanced crypto portfolio, but in a volatile market like crypto, your portfolio mix can be disturbed quite often. The change in prices of one or a few cryptocurrencies in your portfolio can increase or decrease your risk by a fair bit, calling for rebalancing.
But based on where you buy your crypto basket from, most providers have an auto-rebalancing feature. They automatically rebalance the crypto assets in your portfolio to the desired or specific mix you started with at regular intervals. It helps you maintain a healthy balance of risk-to-return ratio at all times.
A crypto basket is an emerging financial product in the crypto markets. It makes crypto investing simpler than ever before. This is especially true for passive investors who do not have the time or expertise to navigate the volatile crypto market but still want to invest in it.
As the crypto market develops, crypto basket investing may become more mainstream. Even players like JP Morgan are propagating investing through this medium. They have a basket that indirectly gives people exposure to the crypto assets by tracking the companies developing in the crypto ecosystem.
1. Can I buy a basket of cryptocurrency?
Yes, you can buy Coin Sets, which are crypto basket products offered by Mudrex. It is the biggest crypto indexing platform globally. You can simply register with Mudrex and start your investing journey hassle-free today.
2. How do you get a basket of cryptocurrencies?
You can simply go to any crypto platform like Mudrex that offers crypto baskets. The one offered by Mudrex is called Coin Sets. Just select the theme you prefer based on your investment goal and risk appetite and simply register for an account buy with your local currency (USD, INR, etc.)