Tokenized portfolios are gaining momentum as an effective way for everyday consumers to gain exposure to major cryptocurrencies without owning them directly. Instead, they own shares in a fund in the form of tokens.
Here, Tokenbox.io co-founder and managing partner Vladimir Smerkis explains a little bit more about how they work.
1. What makes tokenized portfolios so special?
First of all tokenized portfolios give people transparency. As a main global benefit of blockchain technology, tokenization makes it possible to review the full way of how assets are moving from user to platform and the other way around.
We believe the tokenization of every asset in the world is a matter of time.
Storage is an important part of tokenization also. You no longer need to sign tons of documents, order safe storage in the bank for your useless paper, everything you need to have – as an internet access. Portfolio managers can accept investors without onboarding clients. You can use these tokens as a storage of a “digital ETF” pie, and do redemptions whenever you want.
Easily countable. Portfolio tokens represent a value of all funds in a portfolio divided by number of investors. Simple math that a middle schooler could do.
2. What’s in it for the traders who launch a portfolio?
So a trader creates a portfolio (or many portfolios if they have multiple strategies), sets up a token, its value and describes briefly its strategy and sets its own fees (entry fee, exit fee and upside fee). This whole operation takes no more than one minute.
Traders can get investors/clients within a platform. They can create and track multiple portfolios. It can be both public and private. If a trader doesn’t want to accept internal investors from the platform it is possible to hide the portfolio from the public.
They can onboard clients easily.
3. How can potential investors verify that a portfolio is a good opportunity?
Transparency and trust are the key factors.
Every investor can take a deep look inside every trader’s moves, losses and gains throughout its existence.
A variety of strategies from hundreds of traders on the platform provide the possibility to spread investors’ funds in a safe and diversified way. Trading is a 24/7 job. Not many investors can do it. But they can easily diversify their assets and investments with multiple strategies. Tokenized portfolios make all of this transparent.
4. Are there any minimum investment amounts that consumers face?
We believe that liberal blockchain rules definitely need to be applied to the Tokenbox platform too, that’s why everyone, including people just getting their feet in the crypto world should have the opportunity to participate.
We have a minimum of just 20 USD for investing portfolios. There is no minimum for using our wallets, exchange and other features we have.
5. Can exposure to cryptocurrencies help an investor diversify their portfolio?
Definitely. Nothing changed over the past 3 or 4 years. Cryptocurrencies have tremendous upside potential, but the risks are harder for newbies to spot. That’s the reason a lot of newcomers see volatility of +20%-40% and go all in, losing all of their funds exploring margin calls for the first time. I believe that every rational investor should be in crypto for at least 5%-10% of their funds and everyone should keep in mind that this field has a high risk of losing all of your investment.
That’s why when you start to explore the market it is better to diversify and trust professionals.
My exact recommendation would be to take a look at portfolios and traders we have on the platform, looking at the performance stats every one of them has on its portfolio page.
6. What should an investor look for when they are comparing tokenized portfolios?
Don’t believe words, only results. We can post a beautiful picture of a nice gentleman with a smile in a beautiful suit, but that doesn’t mean he’s a good trader.
Strategy. You should understand what traders are attempting to do. Is he going for high risk, high return or a low-risk, low upside profile.
Stats. Explore each stats page – what was the performance over the past period of time, what was the biggest loss.
AUM and number of investors. We’ve only just started, so there are not thousands of investors with track records on our platform. But even so, as a general rule, the more investors that trust a certain trader, the more likely that trader is bringing real benefits to the public..
And remember, if you change your mind you can easily move from one portfolio to another by selling tokens in the blink of an eye.
7. What are some of the features that Tokenbox offers?
We are a full-service platform for storing, buying, selling, trading, and gaining exposure to digital assets. We are the only platform that is not a copycat, offering a unique service.
We are very user-friendly (including our quick support team), we deliver unique services both for traders, investors and all of the blockchain/crypto people around the globe.
A list of our main features would include the following:
- a crypto wallet
- buying crypto with a credit card
- an exchange terminal for traders
- multiple trading accounts (sub-accounts)
- multiple portfolio accounts (for traders who would like to accept investments from platform users)
8. Why would someone want to buy into someone else’s portfolio when they can build one themselves?
The short answer? “Two heads are better than one.”
I’ve seen dozens of people who pretended to become “pro traders” within a month they hopped on the latest trend. At first they succeeded when the market was growing, but then they lost everything when the market crashed.
I believe that being a pro trader is a really hard job that requires you to be online 24/7. But also — trading is a psychological game, and people make mistakes.
For me, as a professional in this field I do both — trade for myself and invest in our platforms traders portfolios.
9. Are these types of products suitable for those who are new to cryptocurrencies?
I would divide our product offerings by a user’s knowledge level:
Newbies can get a sense of crypto investing space without the need to invest thousands or hundreds of thousands of their funds in ETFs, funds or unknown traders.
PROs can diversify their investments by “hiring trading heads,” which in the end will be cheaper, than having one trading desk at the office.
Traders can run their portfolio, like they did before, but on a user-friendly platform and (what’s important) get clients and earn for clients and themselves, which is totally a win-win solution.