5 Best Crypto Index Funds of 2025
The best crypto index funds combine a strong investment strategy and smart asset allocation with reasonable fees, excellent past performance, and solid security and management.
Crypto is popular and exciting, but it’s often too complicated for many investors. In contrast, index funds have been around for a long time and are easier to understand. Crypto index funds combine the best of both worlds.
In this list, we’ll break down the best crypto index funds available in the market and give you the tools and resources to choose what suits your goals best.
What are Crypto Index Funds
Crypto index funds are an easy way to invest in different cryptocurrencies, similar to how traditional index funds let you invest in a mix of stocks or bonds. These funds aim to match the performance of a specific part of the crypto market, giving you broad exposure without the hassle of managing individual cryptocurrencies.
Traditional index funds have been popular for a long time because they’re simple and stable, often tracking well-known indices like the S&P 500. They invest in various traditional assets like stocks and bonds and operate within established regulatory frameworks.
Crypto index funds, on the other hand, are made up of cryptocurrencies, including big names like Bitcoin and Ethereum, along with other smaller altcoins. This means they operate in a less regulated, more volatile, and unpredictable market.
By investing in a range of cryptocurrencies, these funds reduce the risk that comes with the wild price swings of individual coins. This makes them a good option if you want to get into the crypto market without the stress of managing multiple investments. Another perk is that it’s easy to invest. You can get exposure to a wide range of cryptocurrencies through a single investment without needing to understand the technical details of each coin. But there are some risks too.
Check out our in-depth guide on Crypto Index funds to learn more.
How Do They Work?
Think of the best crypto index funds like a basket filled with various digital coins, such as Bitcoin, Ethereum, and other up-and-coming cryptocurrencies.
These funds follow an index that represents a segment of the crypto market, like the top 10 cryptocurrencies by market cap or the best DeFi coins. So, when you invest in a crypto index fund, you buy shares of the fund, not the actual cryptocurrencies. The value of your shares depends on the performance of the underlying cryptocurrencies in the fund’s portfolio. Hence, as the value of these cryptocurrencies goes up or down, so does the value of the fund.
Professional managers or algorithms regularly adjust the portfolio to keep the right balance of each cryptocurrency. For example, if Bitcoin’s value skyrockets, the fund might sell some Bitcoin and spread the money across other cryptocurrencies to keep the balance. Hence, crypto index funds usually have an expense ratio, a fee you pay for the management of the fund. This fee is generally lower than what you’d pay for actively managed funds, as it covers the cost of maintaining the portfolio.
Lastly, a quick note – crypto index funds and index token funds are quite similar. If you don’t know what index token funds are, they are basically funds that use blockchain technology to manage and rebalance the portfolio automatically with smart contracts.
For this list of best crypto index funds, we can consider them essentially the same because both offer a straightforward way to invest in a broad range of cryptocurrencies without the hassle of managing each one individually.
Choosing the Best Crypto Index Funds to Invest in?
There are many factors to consider before choosing the best crypto index funds to invest in, but here are some of the most important ones.
Asset Allocation
A well-diversified fund invests in various cryptocurrencies, reducing risk and increasing potential returns. Look for funds that include a mix of high-cap, mid-cap, and small-cap cryptocurrencies. This mix lets you invest in established coins like Bitcoin and Ethereum while also giving you a chance to benefit from emerging ones.
Think about your own preferences too. Maybe you’re interested in DeFi tokens, or perhaps you prefer stability over high profits and want a fund that only includes high-cap coins. On the other hand, if you’re willing to take more risks for bigger gains, you might choose a fund with a mix of different cryptocurrencies. Whatever your preferences are, make sure you do thorough research and planning. Then, pick an index fund that matches your goals.
Fees
Crypto index funds usually have management fees, trading fees, and other hidden costs.
Compare the expense ratios of different funds and go for ones with lower fees to get the most out of your investment. However, don’t pick a fund just because it has a low expense ratio. Sometimes, the most reputable and well-performing index funds have higher management fees compared to newer, riskier funds. If a fund has an extremely low expense ratio, it might be a red flag.
At the same time, be careful with funds that have high management fees because they can eat into your returns, especially in a volatile market. Instead, look for a fund with reasonable fees for its reputation and track record. Aim for a balance between cost and credibility.
Performance History
Reviewing a fund’s performance history helps you see its past success and how it handles market ups and downs. While past performance doesn’t guarantee future results, it gives a snapshot of the fund’s management and strategy.
Here are some practical metrics and factors to consider:
- Historical Returns: Look at the fund’s returns over 1-year, 3-year, and 5-year periods.
- Sharpe Ratio: A higher Sharpe ratio means better performance for the risk taken.
- Maximum Drawdown: This shows the biggest drop in the fund’s value. It helps you understand the worst-case scenario.
- Benchmarks: Compare the fund’s performance to major cryptocurrency indices or traditional financial indices.
- Consistency: Find funds that consistently meet or beat their benchmarks over multiple periods. This suggests good management and a robust investment strategy.
- Management Team: Check for changes in the fund’s management team. Frequent changes might signal instability, while a stable team can mean reliable performance.
- Market Conditions: See how the fund performed in different market conditions, like bull and bear markets. A fund that does well in various conditions shows resilience.
By looking at these factors, you can better understand a fund’s past performance and its potential for future success.
Security and Management
Take a close look at the fund’s management team. Unlike regular cryptocurrencies that you hold in your own wallet, index funds give you exposure to crypto without you actually holding the assets. The management team handles the custody of the crypto, so it’s important to find a team you trust.
Experienced and knowledgeable managers can better navigate the complexities of the crypto market. Research their background and track record to see how well they’ve done in the past. Also, check the security protocols they have in place to keep your investment safe. A good management team with strong security measures is crucial for a successful investment.
Best Crypto Index Funds:
1. Bitwise 10 Crypto Index Fund
The Bitwise 10 Crypto Index Fund is one of the best crypto index funds out there. It offers broad exposure to the crypto market with the security and simplicity of a traditional investment. If you’re looking for a secure and easy way to dive into crypto, this might be just what you need.
It tracks an index of the 10 most valuable cryptocurrencies. These are carefully screened for risks, weighted by market cap, and rebalanced every month. Bitwise 10 Crypto Index Fund uses the ticker “BITW,” which you can use to find and trade shares in your brokerage account.
The fund has a 2.5% expense ratio, covering management fees, custody charges, and other standard fees. However, it does require a minimum investment of $25,000.
What’s in the fund? It’s mostly made up of 68.9% Bitcoin and 22.4% Ethereum, with smaller coins like Solana making up just 4.1%. The projected annual return is an impressive 100.9%, and since its start, the fund has returned 417.9%.
Bitwise selects cryptocurrencies based on strict criteria like market cap, liquidity, and security. The Bitwise Crypto Index Committee, led by experts such as Matt Hougan, ensures everything runs smoothly and transparently. They’re backed by an Advisory Board of industry leaders, including Spencer Bogart.
Overall, a great choice for beginners looking for diversified exposure to Bitcoin and other top cryptocurrencies. The only drawback is its high minimum investment requirement.
2. Bitwise DeFi Crypto Index Fund
The Bitwise DeFi Crypto Index Fund is quite similar to the Bitwise 10 Crypto Index Fund. Both funds screen and monitor assets for risks, weight them by market capitalization and rebalance monthly. This fund also has a 2.5% expense ratio and requires a minimum investment of $25,000.
As the name suggests, this fund tracks an index of the largest decentralized finance (DeFi) crypto assets and is held with a regulated, third-party custodian for added security. Its holdings include Uniswap at 43.9%, Maker at 19.3%, Lido at 12.8%, Aave at 11%, and six other tokens.
If you’re wondering how they select these cryptocurrencies, it’s based on market capitalization, liquidity, and security standards. Bitwise also considers past exploits and hacks.
The index is managed by the Bitwise Crypto Index Committee, including experts like Matt Hougan, Hunter Horsley, and Hong Kim, who ensure a transparent, rules-based selection process. An Advisory Board with industry leaders like Spencer Bogart and Srikant Dash supports this process.
As for its performance, the fund has an average annual return of 23.5%, but it’s down by 79.7% since its inception. This highlights the high volatility of the DeFi space. Nonetheless, for those looking to invest in the DeFi sector, the Bitwise DeFi Crypto Index Fund is the best crypto index fund you can invest in.
3. DeFi Pulse Index (DPI)
The DeFi Pulse Index Fund, like the Bitwise DeFi Crypto Index Fund, tracks some of the biggest decentralized finance (DeFi) crypto assets. These assets are chosen based on market cap, liquidity, and security standards, giving you broad exposure to the DeFi sector.
This fund uses a passive strategy and rebalances monthly to keep up with the market. To avoid over concentration, no single asset can exceed a 25% allocation. The DeFi Pulse Index evaluates these tokens on four dimensions: two for the token’s characteristics, one for the project’s characteristics, and one for the protocol’s characteristics.
The index includes major DeFi tokens, like Uniswap weighted at 26.7%, Aave at 13.5%, and Maker at 23.8%. It also features Compound at 3.2%, Yearn Finance at 1.8%, and Synthetix at 5.7%. Right now, DeFi Pulse Index shares (DPI) are trading at around $97.
The expense ratio for this fund is a competitive 0.95% annual fee, which covers the costs of managing and maintaining it. Plus, there’s no minimum investment requirement, making it accessible to more investors.
Although it’s new, having launched in 2020, the DeFi Pulse Index Fund has shown consistent performance. While there is limited long-term data, it remains one of the best crypto index funds for those looking to invest in the DeFi space.
4. Grayscale Digital Large Cap Fund (GDLC)
If you’re looking for a trusted name among the best crypto index funds, the Grayscale Digital Large Cap Fund (GDLC) is a solid choice. With a market price of $23.90 as of July, it’s backed by Grayscale, known for its extensive crypto-based securities products, including the recent Spot Bitcoin ETF.
One cool perk of GDLC is that you can hold its shares in tax-advantaged accounts like IRAs and brokerage accounts. This is a great way to add crypto to your retirement portfolio and get tax benefits.
GDLC uses the CoinDesk Large Cap Select Index as its benchmark and holds only five cryptocurrencies. These include Bitcoin at 70.83%, Ethereum at 20.65%, Solana at 4.21%, XRP at 1.72%, and Avalanche at 0.59%. The fund has a management fee of 2.50% and an average return of 177.31%, with a total return from inception of 33.23%. Check out their fact sheet here.
Managed by Grayscale Investments, a subsidiary of Digital Currency Group (DCG), the fund benefits from a team with a lot of experience in finance, technology, and regulatory matters. They make sure the fund meets its investment goals.
To protect your investment, Grayscale uses strong security measures like multi-signature wallets and cold storage through Coinbase Custody. On top of that, regular third-party audits and insurance coverage for digital assets provide extra security.
The Grayscale Digital Large Cap Fund offers a reliable and secure way to invest in the top crypto assets, making it a standout option among the best crypto index funds.
5. CRYPTO20
Launched in December 2017, CRYPTO20 was the first tokenized crypto index fund on the market. It’s a unique entry in the list of the best crypto index funds, as it tracks the performance of the top 20 crypto assets using a single token, C20.
The fund uses a passive strategy with weekly rebalancing and caps any single asset at 10% to reduce risk. It also uses staking and similar methods to generate extra returns. As of the last available data in 2022, the fund size was $56,620,075, and it requires a minimum investment of $1,000. The expense ratio is 1.5% annually.
CRYPTO20 had impressive returns in 2020 and 2021, with gains of 110.6% and 140.0% respectively. However, it saw a drop in 2022, with returns of 66%. The fund is managed by Invictus Asset Management Limited, with administrative support from Catalyst Fund Administration Ltd and auditing by MHA MacIntyre Hudson.
Despite its promising start, CRYPTO20 seems to have been somewhat neglected, as the last available data is from 2022. However, for those looking to invest in a range of top cryptocurrencies through a single token, CRYPTO20 is still something you can consider, as it’s still available to trade on most crypto exchanges.
Final Thoughts
If you want broad market exposure, check out the Bitwise 10 Crypto Index Fund. For targeted DeFi investments, the Bitwise DeFi Crypto Index Fund and DeFi Pulse Index are great choices. The Grayscale Digital Large Cap Fund is perfect if you’re looking for a trusted and established option.
Each fund has its pros and cons, but together they offer some of the best ways to dive into the crypto market with a balanced approach.