In the cryptocurrency world, there is no shortage of coins and new currencies. Abra, the popular cryptocurrency wallet provider, is issuing its own token. Unlike what other service providers have done, Abra is linking this token to the Bitwise 10 Crypto index.
The new Abra Token Explained
It is rather uncommon to see new cryptocurrency tokens being linked to an investment fund. At the same time, one has to wonder why no one thought of this opportunity sooner. Given the growing demand for exposure to all cryptocurrencies, it is only normal service providers look for ways to streamline the investment process accordingly.
Abra is doing this in a rather unusual method. The cryptocurrency wallet provider is issuing the Bitwise 10 Crypto Index Token, or Bit10. As the name suggests, this token is linked directly to the Bitwise 10 Crypto Index, which tracks 10 of the top cryptocurrencies by creating a balanced portfolio. Diversification is key in the cryptocurrency world, and getting people acquainted to this process at an early stage is a smart idea.
Because of this new token, potential investors only have to purchase 1 asset to effectively set up a 10-currency portfolio. It makes it a lot easier for institutional traders, although consumers can also benefit from this new development accordingly. The portfolio will be rebalanced automatically every month, which means investors will always get the best possible combination without having to keep close tabs on their portfolio at all times.
Considering how these 10 top cryptocurrencies represent the lion’s share of the total market capitalization, the new token will undoubtedly be of great interest. Currencies supported at this time include Bitcoin, Ethereum, XRP, Stellar, EOS, Dash, Monero, ZCash, Litecoin, and Bitcoin Cash. That does not coincide with the current top 10 rankings according to CoinMarketCap, though the choices also make a lot of sense first and foremost.
Abra CEO Bill Barhydt explains how the new token is 100% Bitcoin-based. This Bitcoin is collateralized through a multi-sig wallet. The amount of Bitcoin held by a Bit10 owner is adjusted to reflect the USD value of the Bit10 index at all times. Abra is the counterparty and takes care of the counterparty risk on all contracts. A very interesting creation which makes investing in different cryptocurrencies a lot more straightforward.
Despite linking this token to the Bitwise index fund, it is not an ETF. There is still a very big difference between the two, although this token will perform in a similar manner to exchange-traded funds. Bitwise still has a plan to introduce its own ETF in the future, although it seems unlikely the SEC will approve such vehicles in the near future.