Crypto investing can be overwhelming. With thousands of digital assets, volatile price swings, and complex technology, many investors struggle to build a balanced portfolio. That’s where crypto index funds come in—offering a smarter, simpler way to gain diversified exposure to the digital asset market.
These funds bundle top cryptocurrencies into a single investment vehicle, much like traditional index funds track stock market indices such as the S&P 500. By spreading your capital across multiple coins, you reduce the risk of relying on any one asset while benefiting from broader market growth.
In this guide, we’ll explore the 5 best crypto index funds of 2025, breaking down how they work, what makes them stand out, and which might be right for your investment goals.
What Are Crypto Index Funds?
Crypto index funds are investment vehicles that track a specific basket of cryptocurrencies, aiming to mirror the performance of a defined segment of the market—such as the top 10 coins by market cap or the leading DeFi tokens.
Unlike picking individual cryptos, these funds offer instant diversification, professional management, and reduced volatility. You buy shares in the fund rather than holding each coin directly, making it easier to manage and more accessible for both new and experienced investors.
👉 Discover how crypto index funds can simplify your investment strategy.
How Do Crypto Index Funds Work?
Imagine a digital basket filled with Bitcoin, Ethereum, Solana, and other high-potential altcoins. That’s essentially what a crypto index fund is.
These funds follow a rules-based index, automatically rebalancing their holdings monthly (or weekly) to reflect changes in market value and composition. For example, if Bitcoin's dominance grows too large, the fund may sell a portion and reinvest in underweight assets to maintain balance.
Most funds charge an expense ratio—a small annual fee covering management, custody, and operational costs. While typically lower than actively managed funds, it's still important to compare fees across options.
Some funds use blockchain-based tokens (like DPI or C20), enabling trading on decentralized exchanges, while others operate through traditional brokerage platforms.
Key Factors When Choosing a Crypto Index Fund
Before investing, consider these critical factors to ensure you pick a fund aligned with your financial goals and risk tolerance.
Asset Allocation
Diversification is key. Look for funds that include a mix of:
- Large-cap coins (e.g., Bitcoin, Ethereum) for stability
- Mid-cap projects (e.g., Solana, Avalanche) for growth potential
- Niche sectors like DeFi or layer-1 blockchains for targeted exposure
A well-balanced allocation reduces reliance on any single asset and enhances long-term resilience.
Fees and Expense Ratios
Compare management fees carefully. While lower fees are generally better, extremely cheap funds may lack robust security or experienced teams. A reasonable range is between 0.95% and 2.5% annually.
Also watch for hidden costs like trading spreads or withdrawal fees.
Performance History
Past performance isn’t a guarantee—but it’s a strong indicator. Evaluate:
- Annual returns over 1-, 3-, and 5-year periods
- Performance during bear markets
- Consistency in meeting benchmarks
Funds with steady growth across market cycles often reflect sound strategy and experienced oversight.
Security and Management
Since you don’t hold the underlying assets directly, trust in the fund’s custodian and team is essential. Prioritize funds that:
- Use cold storage and multi-signature wallets
- Partner with regulated custodians (e.g., Coinbase Custody)
- Have transparent governance and regular audits
A stable, experienced management team adds credibility and long-term reliability.
The 5 Best Crypto Index Funds of 2025
1. Bitwise 10 Crypto Index Fund (BITW)
The Bitwise 10 Crypto Index Fund tracks the top 10 largest cryptocurrencies by market capitalization, rebalanced monthly. It’s ideal for investors seeking broad exposure with rigorous risk screening.
- Holdings: 68.9% Bitcoin, 22.4% Ethereum, 4.1% Solana
- Expense Ratio: 2.5%
- Minimum Investment: $25,000
- Ticker: BITW (available via brokerage accounts)
Backed by the Bitwise Crypto Index Committee and an advisory board of industry leaders, this fund emphasizes transparency and security. Despite its high entry barrier, it’s one of the most trusted institutional-grade options.
👉 See how BITW compares to other top-performing crypto funds.
2. Bitwise DeFi Crypto Index Fund
Focused exclusively on decentralized finance, this fund gives targeted access to leading DeFi protocols.
- Top Holdings: Uniswap (43.9%), Maker (19.3%), Lido (12.8%)
- Expense Ratio: 2.5%
- Minimum Investment: $25,000
While it has declined since inception (-79.7%), its long-term potential remains strong for those bullish on DeFi innovation. Managed using strict criteria around liquidity and security, it’s best suited for risk-tolerant investors.
3. DeFi Pulse Index (DPI)
The DeFi Pulse Index (DPI) is a tokenized fund tracking top DeFi projects with built-in diversification rules.
- Cap per Asset: Max 25% allocation
- Expense Ratio: Just 0.95%
- No Minimum Investment
- Available On: Ethereum blockchain (ERC-20 token)
With holdings in Uniswap (26.7%), Maker (23.8%), and Aave (13.5%), DPI offers low-cost, flexible access to DeFi’s core ecosystem—perfect for retail investors.
4. Grayscale Digital Large Cap Fund (GDLC)
Backed by Grayscale—one of the most recognized names in crypto—GDLC holds the top five large-cap digital assets.
- Portfolio: Bitcoin (70.83%), Ethereum (20.65%), Solana (4.21%)
- Expense Ratio: 2.5%
- Market Price: ~$23.90 (as of mid-2025)
GDLC can be held in tax-advantaged accounts like IRAs, making it ideal for retirement planning. Its custody through Coinbase and third-party audits ensure high security standards.
5. CRYPTO20 (C20)
Launched in 2017, CRYPTO20 was the first tokenized crypto index fund, tracking the top 20 cryptocurrencies.
- Single Asset Cap: 10%
- Expense Ratio: 1.5%
- Minimum Investment: $1,000
- Rebalancing: Weekly
Though data hasn’t been updated since 2022, C20 remains tradable on major exchanges and offers staking rewards—a rare feature among index funds.
Frequently Asked Questions (FAQ)
Q: Are crypto index funds safe?
A: They are generally safer than holding individual altcoins due to diversification and professional custody. However, they still carry market risk and should be part of a balanced portfolio.
Q: Can I invest in crypto index funds with a small budget?
A: Yes—funds like DPI and CRYPTO20 allow entry at any level, while others like BITW require higher minimums ($25K).
Q: How are crypto index funds taxed?
A: Tax treatment depends on jurisdiction and account type. In some cases, they’re treated like securities; in others, as digital asset transactions. Always consult a tax professional.
Q: Do crypto index funds pay dividends?
A: Not traditionally—but some generate yield through staking or protocol rewards (e.g., CRYPTO20).
Q: What’s the difference between an ETF and an index fund?
A: ETFs trade like stocks on exchanges throughout the day; index funds may have fixed pricing or trade less frequently. Many “index funds” in crypto function similarly to ETFs but aren’t SEC-approved.
Q: Should I choose a broad-market or sector-specific fund?
A: Broad-market funds (like BITW or GDLC) offer stability; sector-specific ones (like DPI) offer higher growth potential but come with greater volatility.
Final Thoughts
Crypto index funds are one of the most effective ways to enter the digital asset space without the stress of managing dozens of individual coins.
Whether you're drawn to broad exposure via Bitwise 10, targeted DeFi growth with DPI, or institutional-grade security through Grayscale, there’s a fund that fits your strategy.
👉 Start building your diversified crypto portfolio today with expert-backed tools and insights.