How cryptocurrency investing is evolving to attract more customers

Crypto start-up KoinBasket helps novice investors to buy and sell digital tokens in a similar way to mutual funds and ETFs

KoinBasket’s engine compiles complex cryptocurrency data and analyses current market trends, past performance and valuations to create ready-to-invest thematic and sector-based baskets. Reuters

What if buying cryptocurrencies was as easy as online shopping? That’s what cryptocurrency investment platform KoinBasket promises its users.

Now available in the UAE, the app offers cryptocurrency investing to users based on diverse themes and provides them with analysis on the asset class. It was created with the aim of solving the challenges faced by novice investors in studying and investing in assets such as cryptocurrencies and non-fungible tokens (NFTs).

Similar to investing in index funds or exchange-traded funds (ETFs), KoinBasket users can invest in a curated basket of cryptocurrencies.

“The main reason why KoinBasket will be a game-changer in this market is because there is no know-your-customer process, which is the biggest headache for any user. All they need to do is use their cryptocurrency exchange credentials to browse through our baskets,” says Khaleelulla Baig, founder and chief executive of KoinBasket.

“We also do not take custody of funds and assets. While retail investors usually connect their exchange accounts with third-party apps by sharing their secret API keys, which is a high security risk, KoinBasket allows them to invest in diversified crypto baskets without seeking access to their secret APIs.”

It has, however, been a difficult year for cryptocurrency investors.

Bitcoin plunged from a record high of about $68,000 last year to trade in the $20,000 range on Thursday, while the cryptocurrency sector’s market capitalisation has fallen below the $1 trillion mark.

Analysts say that the cryptocurrency roller coaster ride is far from over, dragged down by this year’s equity bear market, global economic uncertainty, higher interest rates and a sharp rise in the cost of living around the world.

“When we do a comparative analysis between stock markets and cryptocurrencies, I use the analogy of the former being a mature, 40-year-old guy, which at the age of 15 was as volatile as crypto today,” Mr Baig says.

“Cryptocurrency is an adolescent asset class that needs to grow and evolve. Because we are still in the R&D phase, you will see a lot of fluctuations and crypto projects going bust. Once the market matures after five or six years, you will see more stability, Bitcoin not fluctuating more than 10 per cent and the top 10 cryptocurrencies being very stable.”

KoinBasket’s engine compiles complex crypto data and analyses current market trends, past performance and valuations to create ready-to-invest thematic and sector-based baskets such as G.O.A.T basket, NFT & Gaming basket, Whale basket and more, tailored according to investor preferences.

It is complicated and time-consuming for beginners to build a diversified investment portfolio and rebalance it. If people find a ready-to-invest ETF or an index fund kind of platform, it becomes easy, according to KoinBasket’s founder.

A user can download the KoinBasket app, which is available on iOS and Android, and must have an existing cryptocurrency trading account, for example, in BitOasis, Coinbase or Binance. They can use the same login credentials to access the KoinBasket investment interface, pick a crypto basket and execute the trade in a single click.

Through a single gateway, the user can choose several cryptocurrencies from a basket and execute the trade on the same environment without having to leave the screen and go to another application, doing another login. All frictions are removed, Mr Baig says.

“When you come on KoinBasket, we are not just solving the problem of where you buy, we are also solving the problem of what you buy and how much you buy,” he says.

“The exchange will never tell you what to buy. You will have to do your own research and then execute the trade. But on Koinbasket, we give you ready-to-invest baskets. As soon as you come on the platform, you find the most suitable basket and buy it in two clicks.”

Investing in a basket of cryptocurrencies will often provide a well-diversified benefit compared with investing in just one or two big names, according to Devesh Mamtani, chief market strategist at Century Financial in Dubai.

"The entire domain of cryptocurrencies is often confusing and becomes quite daunting to understand. This is primarily due to the complex nature of the underlying domain terms and the understanding of its primary and actual case," he says.

"Cryptocurrency prices tend to be volatile, with the domain having seen a lot of flash crashes. Looking at the total number of trading pairs and exchanges in this domain can give the investor headaches."

Popularity drives the decisions to create specific crypto baskets, according to Mr Baig.

For example, a lot of people have been hearing about the metaverse. But how will they identify good projects in the metaverse or NFT space? That inspires the KoinBasket team to build crypto baskets.

“We go out in the market, screen cryptocurrencies and segregate them into different classifications,” he says.

“For example, we may find 100 crypto projects on NFT. Out of those, we select and screen six or seven and come up with a final basket.”

The G.O.A.T basket includes cryptocurrencies that have withstood the test of time for at least five years, gone through two or three market cycles and made good returns for investors, while the Lambo basket is a high risk-reward basket aimed to help investors make quick money from small cryptocurrencies that are underpinned by solid fundamentals.

The NFT & Gaming basket focuses on cryptos in the digital art and sports space, while the Whale basket tracks where large institutions are investing. Others include Halal basket, Web3 basket and DeFi basket.

KoinBasket’s health check engine scours crypto data for red flags and lucrative investing opportunities to provide investors with alerts to take prompt action and rebalance portfolios.

Although the platform is geared towards beginners now, it will allow expert investors to create their own crypto baskets and onboard users. This will happen in the next phase, maybe in the next quarter, Mr Baig says.

“We will have a vetting process. We will not allow anyone to come and create a basket. We will speak to the person, understand the background, what's the performance and then allow them to proceed,” he says.

KoinBasket aims to offer users the experience of a Web2 investment platform, but the product is Web3.

“They’ve gone through a similar experience with mutual funds in stock markets. But they will now do it for cryptocurrencies in the fashion of a Web2 platform,” Mr Baig says.

Cryptocurrencies - in pictures

“We want to help the Web2 guys come on to the Web3 ecosystem. From there, we do the hand holding to get deeper into the Web3 ecosystem.”

KoinBasket charges 0 per cent transaction fees and initial investments start from Dh100 in the UAE and $200 in the US.

Founded in late 2021, the Singapore-registered start-up selected the US as its first market considering its size and maturity. After expanding to the UAE, KoinBasket has set its sights on the Asia Pacific region next.

It has signed partnerships with global cryptocurrency exchanges such as Coinbase and will expand in markets where they are dominant.

“In the UAE, the support extended to the crypto ecosystem is amazing,” Mr Baig says.

“Many exchanges are thriving here. Even the overall public has a good sentiment around the crypto investing philosophy.”

KoinBasket raised $2 million in a pre-seed funding round in May this year. The start-up is backed by investors including AngelList Quant Fund, Stonks Fund, Kube VC and senior executives from Ripple, Binance and Google.

“We backed Koinbasket led by Khaleelulla Baig for his audacious vision to make professional crypto investing easily accessible and simple for even a novice investor,” says Miten Mehta, an angel investor from the US and an early backer of KoinBasket.

“The KoinBasket team is on a mission to disrupt the massive asset management industry with an estimated AUM [assets under management] of $145 trillion.”

Meanwhile, Keith Lee, 35, a US-based software engineer, says he chose KoinBasket because he was keen to invest in cryptocurrencies beyond Bitcoin.

“I liked their theme-based investing offering, which enabled me to invest in crypto projects that are in my area of interest,” he says.

“I liked the G.O.A.T. and Moon basket. KoinBasket makes trading across multiple cryptocurrencies simple and convenient and I can easily trade at one go. I did not have to go through the hassle of purchasing one crypto at a time on my exchange.”