Choosing The Best Crypto Tradable Indices: Ultimate Guide

• Apr 11, 2024
Choosing The Best Crypto Tradable Indices: Ultimate Guide

Cryptocurrencies offer great profit potential, but, at the same time, they also have numerous inherent risks. Diversification and risk management are essential to ensure a resilient portfolio, maximizing profit opportunities, and minimizing risks. At Trakx, our mission is to offer financial products that enable people to invest strategically in an advanced way but easily and intuitively. And that is precisely why we developed our Crypto Tradable Indices (CTIs). What are they?

Crypto Tradable Indices are crypto index funds designed to implement advanced diversification and investment strategies, managed via our Index Manager Tool. These baskets of cryptocurrencies are 100% asset-backed with a 1:1 ratio, and unlike crypto ETFs, holders own the underlying crypto assets and can trade anytime, 24/7/365. Additionally, the indices are rebalanced regularly, so you don't need to adjust the exposure manually; our advanced algorithms do it for you.

Whether you are specifically interested in certain crypto sectors, such as Real World Assets (RWA), Decentralised Finance (DeFi), meme coins, Proof of Stake (PoS), or others, you can certainly find the crypto index fund that suits your needs. Furthermore, our CTIs are not only focused on certain crypto themes and sectors but also allow you to implement sophisticated investment strategies, such as with the BTC Momentum CTI, which auto-balances exposure in Bitcoin based on market trends, fitting perfectly for swing traders.

If you are an experienced investor, you will quickly realize the potential of crypto index trading and probably wonder why you did not discover it earlier. If, on the other hand, you are a novice investor, you can save yourself weeks of study, research, and analysis. With our CTIs, you can easily and effectively expose yourself to the sectors you are interested in, minimizing risks and maximizing profit opportunities with sound risk management.

If you wonder how our Crypto Tradable Indices work in practice and do not know which one to choose according to your needs, this explanatory article by Trakx will clarify your doubts. So, let's start this journey together to discover how crypto index funds work and which ones best suit your needs.

The Potential of Crypto Tradable Indices

The inherent volatility of the cryptocurrency market can be frightening, and cases like that of $LUNA can terrify and paralyse investors, making them sceptical about it. Indeed, the risks of seeing a cryptocurrency collapse abruptly are always present, whether due to a hacker attack, a blockchain malfunction, a broken team, regulatory issues, or more.

Consequently, adopting sound risk management strategies is essential, and this is where diversification, a key strategy of any healthy and promising long-term portfolio, comes in. But how can we diversify in the cryptocurrency market simply, efficiently, and partially automatic? Trakx has the answer for you. Through our Crypto Tradable Indices, advanced crypto index funds, you can diversify your portfolio by gaining exposure to multiple cryptocurrencies with a single investment. It is essential to avoid investing in single cryptocurrencies that could collapse at any moment. By spreading the risk over multiple assets, even if one performs poorly, its impact will be limited because it will be counterbalanced by the others that are part of the index. This is not the only advantage; what benefits do crypto index trading bring?

Advantages of Crypto Tradable Indices

  • Portfolio Diversification: Diversification is a fundamental principle of investment strategy that aims to spread risk across multiple assets to mitigate potential losses. Our Crypto Tradable Indices provide a convenient avenue for achieving diversification within cryptocurrency, allowing you to gain exposure to a broad range of assets without requiring extensive fundamental and technical analysis of individual cryptocurrencies.
  • Risk Reduction: The cryptocurrency market is notorious for its volatility and unpredictability. By investing in a crypto index fund, investors can effectively hedge against the risks associated with individual cryptocurrencies, as the diversified nature of these funds helps cushion against adverse price movements in any single asset.
  • Passive Rebalancing: Utilizing advanced algorithms developed by experienced fund managers, our CTIs employ passive rebalancing techniques to maintain the desired asset allocation within the portfolio. This automated process ensures that the allocation of the assets remains aligned with its pre-set specific index parameters, optimizing performance and maintaining a healthy investment approach.
  • Advanced Investment Strategies: Some of our index funds implement sophisticated investment strategies, such as momentum investing of the Trakx BTC Momentum CTI. By leveraging these advanced techniques with our Crypto Tradable Indices, we aim to enhance returns and outperform traditional buy-and-hold strategies.
  • Anytime, Anywhere (24/7): Unlike traditional investment vehicles like mutual funds or ETFs, our CTIs operate 24/7, allowing investors to buy or sell shares at any time from anywhere in the world. This unparalleled accessibility ensures liquidity and flexibility, enabling investors to capitalize on market opportunities as they arise.
  • Low Cost and Hassle-Free: Our crypto index funds offer lower fees than actively managed funds or individual cryptocurrency investments. With no need for active management or individual asset custody, our funds provide a hassle-free investment solution at a fraction of the cost.
  • Built for Demanding Investors: Designed to meet the needs of both institutional and retail investors, with our Crypto Tradable Indices, we offer a robust and reliable investment vehicle for demanding investors seeking exposure to the cryptocurrency market. Whether you're a seasoned trader or a novice investor, these funds provide a scalable and cost-effective solution for accessing advanced investments in crypto.
  • Large Liquidity Available: Unlike some crypto ETFs, where liquidity may be constrained by market demand, our CTIs maintain ample liquidity, with assets backed 1:1. This ensures that investors can easily enter or exit their positions without significant slippage or liquidity risk.

As you can understand, investing in crypto index funds presents a compelling opportunity for investors looking to diversify their portfolios, mitigate risk, and gain exposure to the burgeoning cryptocurrency market. By harnessing the benefits of portfolio diversification, risk reduction, passive rebalancing, advanced crypto trading strategies, anytime accessibility, low cost, and hassle-free investing, our Crypto Tradable Indices offer a sophisticated but accessible solution for investing in crypto assets efficiently.

How Do You Choose Suitable Crypto Tradable Indices?

Despite all the advantages just mentioned of crypto index trading, some necessary considerations need to be made. Indeed, before making any kind of investment, every investor must carefully evaluate several subjective factors. Each person, quite rightly, has a different risk tolerance, different financial goals, different amounts of time available, different time perspectives, available funds, and different investment approaches. So, to choose the most suitable Crypto Tradable Indices for your needs, let's first see what you need to consider.

Risk Tolerance

First, assess how much market volatility you are prepared to tolerate  and how much money you are prepared to risk. In fact, as you can well imagine, if you are 20 years old and these are your first investments, you can potentially take more risk than if you are 80 years old. This is the first indispensable factor for everyone to understand: no investment is uniquely suitable for everyone, and everyone has a different risk tolerance that varies depending on numerous factors, such as age, personal circumstances, risk appetite , and so on. So, don't compare yourself to others, and assess your own risk tolerance to make informed decisions.

Financial Goals

Financial objectives are another key element to consider before making any investment. Are you looking for  'just' a way to beat inflation, or do you want to try outperforming? You need to understand what you want to get out of your investment so you don't get frustrated or worried. Also, always consider that compound interest is probably your biggest ally in investing and that you don't need to make +500% weekly to be satisfied. On the contrary, remember that even a small weekly gain can lead to exponential growth in the long run. As the great Albert Einstein said: 'Compound interest is the eighth wonder of the world. He who understands it, earns it he who doesn't.. pays it.." So, don't be greedy, be patient.

Time Available

Do you have time to do technical and fundamental research and analysis? Are you looking for a passive or active approach? This depends both on your intentions and, above all, on the amount of time you have available. If you have a job that keeps you busy 8 hours a day, it is unlikely that you will be able to devote much time to analysis and active trading. In this case, it may be more advisable for you to invest in indices that offer greater long-term potential so that you can adopt a buy-and-hold or Dollar-cost-averaging (DCA) strategy. Conversely, if you have a lot of free time and want to make investing your main activity, then you can also focus on more volatile indices, with which a thematic rotation or active trading strategy is preferable.

Time Perspectives

This is another fundamental element to consider. How long do you want to keep your investments? Are you a long-term or short-term investor? Is your time perspective days or years? Based on this, you can select the Crypto Tradable Indices that are most suitable for you. If you are a short-term investor, then you can probably focus on more dynamic CTIs for active trading. Conversely, if you are a long-term investor and adopt a buy-and-hold strategy, then it is probably best to avoid CTIs that are tied to specific current passing trends.

Available Funds

Earning 1% on a $100 investment corresponds to a $1 profit, and earning 1% on a $1m investment corresponds to a $10,000 profit; quite a difference, don't you think? This means that depending on your funds, you will probably have to take different investment approaches but remember never to make irrational choices. If you have a large budget at your disposal, a low-profit percentage can still bring you excellent returns. Conversely, if you have little capital at your disposal, you may be tempted to look for higher profit opportunities albeit more risky. Although this factor is important to consider in order to invest consciously, remember that what rewards most is perseverance and patience. Therefore, even if you have little capital, it is inadvisable to seek astronomical profits in the short term, as this could lead to you losing everything. Adopt a strategy that suits you according to your available funds, but be neither hasty nor greedy.

Investment Approach

Finally, consider which trading or investment strategy you want to adopt. If you are aiming for the long term, a dollar-cost-averaging strategy might be right for you. Conversely, if you are an active trader, you can focus on several other strategies that may be more profitable in the short term, such as scalping or swing trading. Nevertheless, the most important thing is to have a clear and defined investment strategy that you follow in a methodological and rational manner. No investment strategy is suitable for everyone, and everyone must find his or her own way. Do your own research (DYOR).

An Overview of Our Crypto Tradable Indices

Now that we have provided you with many indispensable tools for making informed investment choices, we will briefly overview our wide selection of Crypto Tradable Indices. We have more than 25 index funds available, and new indices are released monthly to meet our community's growing demands, in addition to customized solutions for institutional investors. The indices are divided into five categories:

Thematic Crypto Indices

These index groups are designated to offer exposure to a specific sector of the cryptocurrency market. For example, if you are interested in tokenizing assets, the Real World Assets (RWA) CTI might be for you. If, on the other hand, you believe that the future of blockchain is based on Proof of Stake, the Top 10 PoS CTI might be another good choice to consider. The thematic crypto indices are numerous, and whatever your preferred crypto sector is, be it meme coins, DePin, Artificial Intelligence, or others, our Crypto Tradable Indices will meet your needs.

Simple Access Crypto Indices

CTI Simple Access is designed for investors who are not looking for complicated or sector-specific investment strategies but simply want to invest easily and efficiently. Among these CTIs, for example, you can find the Bitcoin Ether 50/50, which self-balances to maintain an equal proportional ratio between Bitcoin and Ethereum, or even the Top 10 Crypto CTI, which is weighted by market capitalisation on the top 10 cryptocurrencies.

Smart Investing Crypto Indices

In Smart Investing crypto index funds, you can find funds using advanced trading strategies. The BTC Momentum CTI, for example, provides variable exposure to Bitcoin depending on the market trend: If the market is trending up, the exposure in BTC will be maximum, if the market is trending down, then the exposure in BTC will be moderate to zero, limiting the risks. Another interesting CTI is the Recovery Index, in which assets that have performed poorly lately and are considered undervalued are grouped together, in the expectation that they will outperform when the broader crypto market recovers. 

Risk-Profiled Crypto Indices

In this selection of CTIs, the choice is easier. There are 3 CTIs: Conservative, Balanced, and Growth Risk Profiled CTIs. This way, depending on your risk profile, you can easily choose the crypto index fund that best suits your risk tolerance.

Staked Crypto Indices

In this group of CTIs, you can capitalize on the profit opportunities promised by staking in cryptocurrencies. Currently available is the Staked Matic CTI, which allows you to replicate the performance of Matic in addition to the yield resulting from the staking rewards.

In conclusion, at Trakx, we hope that this explanation about Crypto Tradable Indices has made you realize the potential of crypto index trading. We have been striving to bring inclusivity, efficiency, and accessibility to the world of crypto investing for several years and will continue to facilitate access to advanced financial products and investment strategies for all.

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