A basket, when used in the cryptocurrency space, refers to a collection of digital currencies managed as a single asset, minimizing the need for holders to monitor individual currencies continuously. A crypto basket is also used interchangeably with a crypto index fund.
Crypto asset baskets gained momentum in 2018, which started by enabling the grouping of multiple coins and offering a single token to facilitate trading. Listing the token on an exchange allows users to trade it as a standard cryptocurrency.
Although the product initially targeted novice traders, it now includes options for experienced users. For instance, the Coinbase Index Fund is focused on large-scale crypto investors and consists of the top coins like Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH) and Litecoin (LTC).
A basket can take many shapes and forms depending on its guiding theme. For instance, it can include all top proof-of-work (PoW) or proof-of-stake (PoS) cryptos, respectively. Others can bring together ERC-20 tokens targeting a particular subsection, such as decentralized finance (DeFi).
Other crypto index funds like the JPMorgan Cryptocurrency Exposure Basket take a different approach. Instead of directly putting together a group of coins, it tracks the shares of several companies interacting with cryptocurrency. Some of the companies in its basket include Microstrategy, Nvidia, Riot Blockchain, and Square.
Notably, assets in a basket can have different percentages, with one or a couple of assets taking the lion’s share. In the case of JPMorgan, Microstrategy takes 20%, Nvidia 15% and Riot Blockchain 18%.
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