By Christiana Sciaudone
Investing.com -- When it's too risky to pick just one or two companies in a nascent industry to invest in, investors turn to ETFs.
With crypto, though, the options have been to buy exchange-traded funds that play crypto indirectly -- through companies like Square Inc (NYSE:SQ) and Nvidia (NASDAQ:NVDA). That may be changing.
Hashdex, a Brazilian asset manager with 250 million reais ($44 million) under management, received approval last month to launch the Hashdex Nasdaq Crypto Index ETF, an open-ended investment fund that will work like a traditional ETF, only it will track bitcoin, ethereum, XRP and other cryptocurrencies. It will list on the Bermuda Stock Exchange, where regulation of digital assets allows for the listing of a fund dedicated to representing the market.
The ETF will track the Nasdaq Crypto Index to represent the institutional investable landscape of cryptocurrency assets, and is being jointly developed by Nasdaq and Hashdex. The methodology and details of the index will be disclosed by Nasdaq when it is launched. Nasdaq declined to comment.
Marcelo Sampaio, chief executive officer of Hashdex, recalls how he first became fascinated with crypto after spending time couch surfing at friends' places at Stanford while he was doing his MBA at the University of Chicago. In 2017, crypto started to look a lot like the dotcom bubble -- there were a lot of companies then that would ultimately not make it, but there had to be stars in there somewhere, too, Sampaio said.
"How do you discover which are the Microsofts, Google (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN) in all that craziness?" Sampaio said in Portuguese in a phone interview. "With a crypto ETF, you have a small piece of exposition for the long term, and if nothing comes of it, you lost a 1%, but the potential for growth is immense."
In 2018, he created Hashdex, which now consists of four funds, including the crypto fund that will become the ETF. Sampaio cautions that investors will have to stomach "ridiculous volatility" in the crypto market, but the payoff should be worth it.
"Crypto is bigger than the internet, it's more transformational," Sampaio said. "It's hard to predict how big it will be."