Basket

November 21, 2023 - Around 2 mins mins to read

What Is a Basket?

A basket, when used in the cryptocurrency space, refers to a collection of digital currencies managed as a single asset, reducing the need for holders to constantly monitor individual currencies. A crypto basket is also commonly referred to as a crypto index fund.

Crypto asset baskets gained popularity in 2018, initially allowing the grouping of multiple coins and providing a single token for trading convenience. By listing the token on an exchange, users can trade it like any other cryptocurrency.

While the product initially targeted beginner traders, it now offers options for experienced users as well. For example, the Coinbase Index Fund caters to large-scale crypto investors and includes top coins such as Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), and Litecoin (LTC).

A basket can take different forms depending on its underlying theme. It can include all the leading proof-of-work (PoW) or proof-of-stake (PoS) cryptos, respectively. Alternatively, it can bring together ERC-20 tokens that focus on a specific subsection, such as decentralized finance (DeFi).

Other crypto index funds, like the JPMorgan Cryptocurrency Exposure Basket, take a different approach. Instead of directly assembling a group of coins, it tracks the shares of several companies involved in cryptocurrency. Some of the companies in its basket include Microstrategy, Nvidia, Riot Blockchain, and Square.

It is worth noting that assets in a basket can have different weightings, with one or a few assets holding the majority share. In the case of JPMorgan, Microstrategy holds 20%, Nvidia holds 15%, and Riot Blockchain holds 18%.