- What is bitcoin?
Bitcoin is a digital asset created in 2008. It is a digital unit of value which can be used as a form of electronic payment to enable individuals and entities to transact value without an intermediary. The technology is a fast and low-cost solution for any two parties with an internet connection, regardless of their location, to securely transfer ownership of assets.
- What are Digital Assets?
Digital assets are tools for exchange of value in the digital economy. They are native to decentralized, permissionless databases (like a blockchain) and enable participants in these networks to trade property of assets with one another.
Bitcoin inaugurated the digital asset class, but, at present, hundreds of new digital assets exist, such as Ethereum or Ripple. While Bitcoin was conceived to provide society with a new form of electronic payment, its key innovation has generated a revolution: for the first time in history, value can be transferred anywhere in the world as quickly as information. The applications of this breakthrough are evident in the subject of money and payments, but there has been growing realization that they can reach much farther.
- What is Blockchain?
The blockchain is at the heart of the Bitcoin technology and underlies most digital assets created in the last few years. In essence, a blockchain is a public information database that can be easily verified as correct by any agent in a network. Its name comes from the fact that blocks of transactions are successively chained over time through the use of cryptography. In Bitcoin’s case, the blockchain stores the history of transactions.
There are a few interesting points about the blockchain: first, the cryptographic linking between blocks guarantees the immutability of the records. This makes it virtually impossible for anyone to spend assets they don’t have or to steal from someone else in the network. Second, the blockchain is highly immune to intervention by any one party, which safeguards assets from corrupt governments, companies or hackers.
Hashdex Digital Assets Index – HDAI
- What is the HDAI – Hashdex Digital Assets Index?
The HDAI is an index designed to replicate the performance of the overall digital asset market. Specifically, the HDAI tracks digital assets that represent a substantial portion of the total digital assets market capitalization, after undergoing strict index eligibility criteria.
- What are the principles that guide the HDAI methodology?
The HDAI is guided by three key principles:
Adaptable: provide a rules-based methodology capable of dynamically adjusting the index composition over time. This ensures that the HDAI accurately reflects the overall digital asset market as it changes over time.
Representative: include digital assets that comprise a significant portion of the digital asset class by market capitalization and digital assets that reach a minimum threshold of market significance.
Trackable: utilize straight-forward automated rules and thorough selection criteria, such as digital asset custody standards, that allow the HDAI to be tracked by funds and other investment vehicles.
- How are HDAI constituents determined?
HDAI constituents are determined quarterly based on eligibility and market capitalization criteria.
A digital asset is eligible for inclusion in the HDAI if it satisfies the following criteria:
– Is traded on a qualified exchange;
– Is supported by an institutional-grade custodian;
– Exceeds minimum daily trading volume thresholds; and
– Has free-floating pricing (i.e., not be pegged to the value of any asset).
The HDAI utilizes a dynamic asset selection process in which eligible digital assets with minimum 0.25% representation by market capitalization are added to the Index. Additional eligible assets will be included if the HDAI has not reached a floor of 75% representation of the eligible market.
- How are weights for HDAI constituents calculated?
Weights for HDAI constituents are calculated according to their relative market capitalizations.
Market capitalization calculation uses each asset’s real-time pricing and a fixed outstanding supply determined once every quarter.
Hashdex Index Fund
- What is the Hashdex Index Fund?
The Hashdex Index Fund is a passively managed fund designed to give sophisticated investors broad exposure to the digital asset market by tracking the Hashdex Digital Assets Index (HDAI). In tracking an index that is designed to capture a significant part of the digital asset market over time by automatically adjusting the number and weighting of included digital assets as the market evolves, the Fund seeks to offer highly diverse exposure to a market that is rapidly changing.
- Why should I invest in the Hashdex Index Fund instead of buying the assets directly?
Digital assets are a nascent asset class which demands unique investing infrastructure. As such, management of a digital assets portfolio requires calls for technical expertise in trading, administration and storage, which can be challenging to investors used to traditional financial assets.
Hashdex is uniquely positioned to provide investors with maximum operational efficiency: the Fund is managed by a multidisciplinary team of early investors in digital assets, highly qualified experts in finance, engineering and law, working with industry-leading service providers to ensure true tracking of the digital assets landscape combined with state-of-the-art security.
Furthermore, the taxation of your investment in the fund is far more simple and effective than the requirements you would be subject to if purchasing and rebalancing a basket of assets directly.
- What is the Fund’s liquidity?
The fund offers daily subscriptions and redemptions. In case of redemptions, the investor needs to give a notice at least 3 days in advance.
- How are the digital assets held by the fund secured?
The fund processes are designed in a way that Hashdex has no direct access to private keys, which are the cryptographic tools controlling account ownership in digital assets networks. All fund’s keys are granted institutional grade custody by at least one of our three providers: Vo1t, XAPO, and Kingdom Trust. These custodians implement sophisticated processes to avoid attacks by hackers and other criminals.
Fund’s assets are transferred daily to those secure storage solutions and are disconnected from the internet (cold storage). This means we don’t keep any relevant amount of assets in exchanges or in hot wallets solutions that are commonly targeted by hackers.
Withdrawals from secure storage are enforced by multisig technology, that requires multiple authorizations from our side to initiate the process of creating and signing transactions, and planned delays of up to 2 days from the authorization to the actual transfer of assets. This service is generally provided by custodians and adds an extra layer of security around failed (or fraudulent) withdrawals.
- Is the fund regulated?
The Fund is registered in the Cayman Islands and subject to the Cayman Islands Monetary Authority.
- Who is the manager of the fund?
The Fund is managed by Hashdex Asset Management, a registered asset manager under the Securities Investment Business Law of the Cayman Islands, subject to the Cayman Islands Monetary Authority. The firm has also filed as an Exempt Reporting Advisor in compliance with SEC rules and under the U.S. Advisers Act of 1940. While the investment manager is an Exempt Reporting Adviser, its provision of services to the Fund will generally not be governed by the U.S. Advisers Act.
- What is the fund’s governance structure?
The Fund has a Board of Directors with a majority of independent members. In addition to Mr. Bruno Ramos de Sousa (Head of Legal and Compliance at Hashdex Asset Management), Mr. Mark Fagan (a partner at Highwater) and Mr. John D’Agostino (a partner of DMS Governance), who have extensive experiences in the investment management industry, oversee the Firm’s management of the Fund and convene regularly to decide on major issues.
The Board of Directors will review the operations of the Company at meetings generally held on a quarterly basis. For each such meeting, the Board of Directors will receive periodic reports from the Firm detailing the performance of the Company and providing an analysis of its investment portfolio.
The asset manager and the Fund also rely on a network of premium service providers to handle legal, compliance, tax and other issues related to the Fund’s management.
- Who is eligible to invest in the fund?
Shareholders in the fund must either be “accredited investors” within the meaning of Regulation D under the U.S. Securities Act of 1933, as amended, or not “U.S. Persons” as defined in Regulation S under the Securities Act.
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