Digital currencies are decentralized, peer to peer currencies that are not influenced by the actions of governments or central banks. They run on open source platforms, and can be traded against fiat currencies, or as funds, at leading trading platforms. Blockchain technology has revolutionized e-commerce and financial services, and more banks are adopting this dynamic technology to process financial transactions.
From Bitcoin to Ethereum: The CryptoFund Covers the Biggest Digital Currencies
Digital currencies have come a long way since inception after the global financial crisis of 2008/2009. Bitcoin was created by ‘Satoshi Nakamoto’, an individual, or group of individuals, who have since disappeared from the scene. Their legacy remains however, with a myriad of digital currencies now available on the market. These include Bitcoin, Litecoin, Dogecoin, Ethereum and hundreds of others which are rapidly garnering the attention of e-commerce retailers, traders, banks, financial institutions, and even regulatory authorities around the world.
One of the world’s premier financial trading platforms, eToro has launched a CryptoFund. This fund tracks the activity of cryptocurrency such as Bitcoin and others. The precise asset allocation in the CryptoFund is as follows:
- ETC (Ethereum Classic) – 4.29%
- DASH (Dash) – 5.02%
- LTC (Litecoin) – 6.42%
- ETC (Ethereum) – 16.35%
- XRP (Ripple) – 32.36%
- BTC (Bitcoin) – 34.66%
Trading the CryptoFund
The bulk of the CryptoFund – 84% – is comprised of Bitcoin, Ripple and Ethereum. In June, the fund tracked negatively with losses of 4.65%, followed by month-to-date declines in July of 25.64%. The eToro CryptoFund is a trading option, meaning that registered clients can benefit from price movements in the fund – regardless of direction. At eToro, there are currently over $300,000 worth of assets under management (daily reading) with the CryptoFund, with hundreds of traders.
Since this is a CopyFund, it is possible to follow successful traders, copy their trades and profit accordingly. The increasing popularity of cryptocurrencies is a result of several factors, notably their increasing adoption in e-commerce, their rarity, and the anonymity that is afforded to traders. Compared to fiat currency which is completely controlled by governments and central banks, cryptocurrency offers multiple trading opportunities. This fund has a market capitalization of at least $1 billion with monthly trading volumes in excess of $20 million.
CryptoFund CFD Trading at eToro
eToro management carefully monitors the individual components of the fund and if any of them dips beneath $1 billion, or if trading volumes are less than $20 million, a currency could be dropped from the fund. The cryptocurrency with the highest market capitalization is Bitcoin at $40 billion, but others like Ethereum and Litecoin also have high market capitalizations. The precise weighting assigned to individual currencies in the fund is determined by the portfolio manager at eToro.
The Crypto Copyfund is traded as a CFD (contract for difference) which is a derivative trading instrument. eToro management protects traders with the limits imposed on the daily trading activity of the CryptoFund. If the limit is exceeded, the fund’s trading activity will be closed for the day. This is done to maintain stability in trading activity, much like the major indices on Wall Street.
Trading Strictly Regulated
eToro is a strictly regulated financial trading enterprise. Only traders from accepted jurisdictions can register, deposit, and trade cryptocurrency online. In the United Kingdom, eToro is registered by the Financial Conduct Authority (FCA) and operates under the name eToro UK. The minimum required deposit is $5,000, and clients are required to be UK residents.