Build your long-term strategy with Nazca: adapting Coinbase Index
Nazca for dummies
If you are committed for the long run and looking to build a fast and effective portfolio, adapting the Coinbase Index-fund (CBI) might just be the perfect start.
What is the Coinbase Index?
First of all, we should understand how the Coinbase Index works: it tracks the performance of all digital assets listed on its sister-company GDAX (now Coinbase Pro), which are then weighted by market capitalization and packed all together as an Index, or a “basket of underlying investments” ready to be tracked as one single entity. Which means, instead of buying Bitcoin, Litecoin, Ethereum (and so on) separately, you buy the fund that already includes them with preset rules (weighting, rebalancing time, etc) with all the benefits of diversification and rebalancing.
CBI is tailored to accredited firms with large capitals, and although there are several others accessible by the average investor, they usually require money to be locked up and no portfolio customization is possible. Luckily, Nazca lets you create, customize and backtest your own index, remaining in total control over your assets.
Creating the index with Nazca
First, Coinbase Index-fund’s current composition is Bitcoin, Ethereum, Bitcoin Cash and Litecoin and they are weighted by market cap, so simply open the Nazca Wizard and select Market Cap Distribution as your model. Rebalance Period in CBI is one year, however we will set 30 days as we prefer to have some more action, right? Feel free to experiment with different (shorter or longer) time frames to find the one that meets your taste.
Maximum Asset Weight will be 70 for CBI.
Now, just select Custom Asset Selection and pick the assets:
Time to backtest! Let’s see how this strategy would have performed in the last year:
The strategy, although simple, proved to be solid: after changing rebalance period to shorter, or longer time frames, the overall profit remains in the 170%-185% range.
Guess what, you are done! Just execute the strategy and Nazca will take care of everything for you.
Worthy note: you spent more time reading this article than creating an effective, auto-rebalancing and diversified portfolio with Nazca. Isn’t that awesome?
Read more at https://nazcabot.io and start investing the smart way.
Should you need any guidance in getting started, you can check our Wiki page and join our Telegram Group.
For more research:
Coinbase Index methodology
Coinbase Index Fund
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