Premined cryptocurrencies such as Ripple (XRP), Tron (TRX), and NEO (NEO) are being avoided from the index funds.
Premined crypto assets are tokens that do not need a blockchain-powered network to be mined from. In reality, the concept includes a more advanced description, but that’s all you need to know now.
The investment management service, Morgan Creek Capital Management, has lately launched an index fund that removed all crypto assets that are over 30% premined. The reason behind this decision is the problems they can bring to the crypto market. Among the coins, we find Ripple‘s XRP, Tron’s TRX, Stellar’s XLM and Neo’s NEO.
As stated by Cryptobriefing:
“Morgan Creek Capital Management has more than $1.5 billion in assets, so its Digital Asset Management Fund is significant. As is the decision to exclude any cryptocurrency with more than a 30% premine. That’s bad news for Ripple, which essentially premined all 100 billion XRP tokens. That’s a problem for the likes of Morgan Creek.”
“Tron took the same approach and premined 100 billion TRX coins. Founder and CEO Justin Sun is rumored to hold billions of coins. NEO issued 100 million tokens at the start and there will be no mining process, which is a simpler version of the same issue as far as the Digital Asset Index Fund is concerned.”
Why are premined coins recognized as an issue?
The company explained that the more tokens of this kind circulate inside the crypto market, the more they imbalance it. Among the negative effects of listing premined tokens, the investment service pointed out the considerable changes in the price of coins, respectively the transformation of the markets. Furthermore, the firm believes that premined coins manipulate a lot the crypto market.
Cryptobriefing went on stating:
“It doesn’t take a huge leap of logic to see that 62 billion XRP or TRX coins hitting the exchanges could massacre the price. While it might seem counter-productive for a company to sabotage its own product, it could happen. If the coins are at an all-time high and major holders simply want to cash out, that could have a real impact on the coin’s price and progress. This kind of dump could also come from the outside. The risk, for the Morgan Creek analysts, clearly outweighs any potential rewards.”
Author: Adriana Midrigan