The Nasdaq Crypto Index has broadened its portfolio from five to nine digital assets, now including Ripple (XRP), Solana (SOL), Cardano (ADA), and Stellar Lumens (XLM). This expansion comes as the Securities and Exchange Commission (SEC) reviews Hashdex’s request to align its ETF holdings with the updated index.
Key Updates to the Nasdaq Crypto Index
- New Additions: XRP, SOL, ADA, XLM
- Existing Assets: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Chainlink (LINK), Uniswap (UNI)
- Purpose: The index serves as the benchmark for the Hashdex Nasdaq Crypto Index US ETF (NCIQ).
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SEC’s Pending Decision on ETF Holdings
Currently, the NCIQ ETF is restricted to holding only Bitcoin and Ethereum under SEC rules. To address this, Nasdaq ISE filed a proposed rule change on March 7, seeking approval for the ETF to invest directly in the newly added altcoins. The SEC has until November 2, 2024, to decide.
Hashdex’s Interim Strategy
While awaiting SEC approval, Hashdex employs a sampling strategy, adjusting BTC and ETH allocations to mimic the broader index’s performance. This approach carries tracking error risks, potentially causing discrepancies between the ETF’s returns and the index.
Background on the Hashdex NCIQ ETF
- Launch: Approved by the SEC in December 2023.
- Objective: Provides diversified crypto exposure via the Nasdaq Crypto Index.
- Current Limitations: Confined to BTC and ETH investments.
Hashdex’s Milestone in Brazil
Earlier this year, Hashdex secured approval from Brazil’s regulator to launch the world’s first XRP spot ETF—the Hashdex Nasdaq XRP Index Fund—listed on B3 stock exchange.
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FAQs
1. Why did the Nasdaq Crypto Index add XRP, SOL, ADA, and XLM?
The expansion aims to reflect the growing diversity of the crypto market and provide a more comprehensive benchmark for investors.
2. When will the SEC decide on Hashdex’s ETF rule change?
The deadline for the SEC’s decision is November 2, 2024.
3. What is the tracking error risk in Hashdex’s current strategy?
By relying solely on BTC and ETH to simulate the index, the ETF’s performance may deviate from the actual index returns.
4. How does the NCIQ ETF differ from Hashdex’s Brazil-listed XRP ETF?
The NCIQ ETF is limited to BTC/ETH in the U.S., while Brazil’s XRP ETF offers direct exposure to Ripple’s native token.
5. Can the NCIQ ETF hold altcoins before SEC approval?
No. The ETF must await SEC authorization to include XRP, SOL, ADA, or XLM in its portfolio.