A basket, when used in the cryptocurrency space, refers to a collection of digital currencies managed as a single asset.
What Is a Basket?
A basket, when used in the cryptocurrency space, refers to a collection of digital currencies managed as a single asset, minimizing the need for holders to monitor individual currencies continuously. A crypto basket is also used interchangeably with a crypto index fund. Crypto asset baskets gained momentum in 2018, which started by enabling the grouping of multiple coins and offering a single token to facilitate trading. Listing the token on an exchange allows users to trade it as a standard cryptocurrency. Although the product initially targeted novice traders, it now includes options for experienced users. For instance, the Coinbase Index Fund is focused on large-scale crypto investors and consists of the top coins like Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH) and Litecoin (LTC).A basket can take many shapes and forms depending on its guiding theme. For instance, it can include all top proof-of-work (PoW) or proof-of-stake (PoS) cryptos, respectively. Others can bring together ERC-20 tokens targeting a particular subsection, such as decentralized finance (DeFi).Other crypto index funds like the JPMorgan Cryptocurrency Exposure Basket take a different approach. Instead of directly putting together a group of coins, it tracks the shares of several companies interacting with cryptocurrency. Some of the companies in its basket include Microstrategy, Nvidia, Riot Blockchain, and Square.
Notably, assets in a basket can have different percentages, with one or a couple of assets taking the lion’s share. In the case of JPMorgan, Microstrategy takes 20%, Nvidia 15% and Riot Blockchain 18%.