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Crypto index funds are customized crypto baskets that allow investors to invest in multiple cryptocurrencies through a single asset, making it easy to implement advanced diversification, sound risk management, and automatic rebalancing. Trakx, an innovative fintech founded in France in 2019 by finance and tech experts, is the leading platform for crypto-index trading, offering the widest selection of crypto-index funds both for institutional and retail investors.
Digital assets are volatile, complex, and difficult to rebalance. One of the most common reasons why crypto traders lose money is that they don’t implement a clear strategy and sound risk management practices. With Trakx’s Crypto Tradable Indices, both novice and experienced investors can implement sophisticated investing strategies, once reserved only for institutional investors, and start bringing their trades to the next level. In this guide, we’ll explore the benefits of crypto index funds and we’ll understand how the Trakx platform works, offering investors the knowledge needed to make smart investing decisions.
Understanding Crypto-Index Trading
Similar to traditional stock market indices, such as the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite, a crypto index groups together multiple cryptocurrencies in a single asset based on specific criteria, such as market capitalization, market’ sector, investing strategies, risk tolerance, or more. Consequently, crypto-index trading allows investors to gain exposure to multiple cryptocurrencies without managing each asset individually. Additionally, Trakx’’s crypto index funds are automatically rebalanced periodically (most of them once a month), making it easier for investors to try to generate alpha (higher return compared to the market’s benchmarks) while managing the portfolio passively without the need for human intervention. You don’t need to worry about researching and hand-picking individual promising digital assets and monitoring every coin’s performance; conversely, you can gain holistic exposure over a specific sector or implement an advanced strategy, for example, based on smart beta models.
Crypto-Index Trading on Trakx
The mission of Trakx is guaranteeing everyone the same financial opportunities, making investments in cryptocurrencies easier, and creating a fairer and more accessible industry that allows both novice and expert traders to implement advanced strategies. What sets Trakx apart is its widest selection of crypto index funds, designed to suit various types of investors and investing strategies. For example, for investors who aim to generate higher returns by taking higher risks, thematic crypto indices can be perfectly suited for them, and they focus on specific market segments such as RWA, AI, Memes, DePin, DeFi, and more. Additionally, for aggressive investors, the Growth Crypto Tradable Indices offers attractive opportunities to generate alpha. Conversely, for conservative investors, the Digital Inflation Hedge (Pax Gold, Bitcoin, USDC) or the Conservative CTI could be a better choice since the volatility is lower and focuses more on capital preservation instead of higher returns.
Benefits of Crypto-Index Trading
Investors looking for advanced strategies and sound risk management can easily understand the potential of crypto-index trading, and in this guide, we’ll explore the most relevant ones.
Risk diversification
One of the primary benefits of crypto-index trading is risk diversification. Instead of researching and investing in individual cryptocurrencies, you can spread the risks across multiple assets at once, gaining holistic exposure over the general crypto market (such as with the Top 10 Crypto CTI), or over specific sectors (such as RWA, AI, Memes, DePin, or more). Diversification can help you cushion your portfolio against collapses or extreme price swings of a single digital asset. Trakx’s wide selection of crypto index funds allows investors to choose the best CTI suited for their needs, risk tolerance, crypto trading strategies, and goals.
Ease of use
Another great advantage is the ease of use that crypto index funds provide. In fact, managing multiple cryptocurrencies across various blockchains on your own can be time-consuming, complex, and stressful, especially in highly volatile markets such as cryptocurrencies. Trakx streamlines this process by offering pre-packed indexes that are automatically rebalanced, ensuring that your portfolio remains always optimized and aligned to your risk tolerance and goals, without requiring constant oversight.
Institutional-grade security
Security is a top priority on Trakx, and the crypto index funds implement the best-in-class asset security, with all assets fully insured in a trusted third-party custodian. No single team member at Trakx can ever move user funds. Transactions require multiple signatories through MPC (Multi-Party Computation), adding an extra layer of security. The platform is highly regulated and compliant, ensuring peace of mind for investors.
Cost-efficient
Crypto-index trading on Trakx is remarkably more cost- efficient compared to manually buying and selling individual crypto assets. There are fewer transaction fees associated with trades, and the streamlined management ensures lower fees. In this way, you can aim for higher returns and generate alpha, such as in actively managed funds, while also enjoying the benefits of passive management, such as peace of mind, lower fees, and more. It can be appealing both for long-term investors (hodlers), and medium-term traders, such as swing traders. For example, swing traders might enjoy the BTC Momentum CTI, which automatically increases and reduces the exposure to Bitcoin based on market trends, seizing the opportunities while decreasing risks.
Tradability 24/7
Unlike crypto ETFs, which depend on traditional market hours, crypto index funds are tradable 24/7 without interruptions, allowing traders to trade at the hour they prefer, without limits. Additionally, unlike some ETFs and various crypto products, Trakx’s CTIs are backed 1:1 with the underlying assets, ensuring always liquidity and low spread in buy and sell orders. It is a great advantage, especially in moments of high volatility, as it allows investors to execute trades with peace of mind and quickly.
How to start trading Crypto Index Funds with Trakx?
If you’re interested in taking your trading to the next level, crypto-index trading is what you need. By trading crypto index funds, you can implement more complex and sophisticated strategies once reserved only for institutional investors, and you can implement sound risk management with peace of mind passively. Trakx is leading the way by making advanced strategies available to everyone, and this is just the beginning. Additionally, Trakx will soon launch its own native $TRKX token, and it will provide holders additional benefits, such as lower trading fees, staking, priority access to new products, customized support, and more.
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This article first appeared at Crypto Briefing
