In the cryptocurrency world, it appears as though Coinbase isn't the only one that wants to simplify the investment process.
Abra, the cryptocurrency exchange and wallet provider, has launched its brand new investment token in order to help upstart investors to get into the cryptocurrency market, all without having to go out and buy the crypto that they want to invest in.
Abra's brand new token, referred to as the BIT10, allows Abra users to invest in the top 10 cryptocurrencies of that month. More importantly, when the user goes onto buy a BIT10 token, they're not actually going on to but the specific crypto, instead, they're buying into a kind of synthetic exposure to that market.
Here's how we can explain it.
Abra's BIT10 token will keep track of the . top 10 cryptocurrencies every month. And as the market value of that crypto increases, so too does the value of the token. Equally, when the market value depreciates, the BIT10 token also reduces in value. Much like any kind of cryptocurrency that people invest in, there are not promises of returns.
While the company's announcement suggests that the BIT10 operates in a similar fashion to an index, security or Exchange Traded Fund (ETF), Bill Barhydt, Abra's CEO, has reiterated that it is not one.
For the average user, Abra's BIT10 tokens can be bought for as little an amount as $5, with no additional fees. The amount that an individual invests goes on to dictate the token's value, and owners can sell their tokens when they please. But the BIT10 is exclusive to Abra, you can’t trade this token outside of the Abra app.
Tokens that are secured in the Abra wallet thanks to the use of a private key, and are verified by the Bitcoin and Litecoin blockchains using a form of basic smart contract called pay to script hash (P2SH).
Much like the new Coinbase Bundles, The BIT10 token is weighed in such a way as to spread your investment across the market as a whole. BIT10's weighting appears, for the most part, to effectively follow the vast range of cryptocurrencies based on the market cap.
While it isn't a wholly true fact. The BIT10 token was initially devised in conunction with the company, Bitwise Asset Management, which actively controls the selection process for 10 coins which are chosen monthly and go on to be featured in the BIT10 Token.
According to the Abra team, once a month, the Bitwise Asset Management company will serve to adjust these 10 coins and their associated weightings, depending on changes in everything behind them, such as their market cap to new regulations which may influence the underlying value of the coin.
While you are investing in a token, you are also investing your trust in Bitwise Asset Management.
The BIT10 token may sound like it's operating in a way that simplifies the process, and makes it easier for the average user to invest in cryptocurrency. The truth is that it's far more complicated than just that.
Much like anything related to the cryptocurrency world, it's important for you to do your research before moving to invest. Especially for BIT10, if you think you're buying a legitimate cryptocurrency, it pays to take that extra step to be sure that you actually are.