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Cryptocurrency at Wealthfront

We offer long-term exposure to Bitcoin through the iShares by BlackRock Bitcoin Trust (IBIT) and Ethereum through the Grayscale Ethereum Trust (ETHE).

As of March 21, 2024 the primary bitcoin ETF that Wealthfront offers is IBIT, not GBTC. Clients who hold the previously offered GBTC will not be sold out of their holdings. All new purchases of the bitcoin ETF will be IBIT, not GBTC.

Cryptocurrency Symbol
Bitcoin                                                                                 IBIT                                         
Ethereum                                                                            ETHE                                        

Both of these investments are trusts. IBIT is offered as an ETF on the NYSE. ETHE works similarly to our ETF offerings but is not traded on an exchange as an ETF. You can add either of these to your portfolio in your Automated Investing Account, and we’ll transition you in and out of these investments tax-efficiently.

Important things to note:

  • We don’t offer individual coins or wallets
  • Cryptocurrency investments carry significant risk! We limit your cryptocurrency allocation to no more than 10% of your portfolio value
  • Cryptocurrency ETFs and trusts aren’t eligible for Tax-Loss Harvesting
  • Cryptocurrency ETFs and trusts can’t be used as collateral for PLOC

What are cryptocurrency ETFs and trusts? 

We offer exposure to cryptocurrencies through shares of BlackRock’s iShares IBIT ETF and Grayscale’s ETHE trust. These trusts allow you to invest in a bundle of cryptocurrency coins, similar to how ETFs and other funds hold certain allocations of stocks, bonds, and/or other assets. Both the IBIT ETF and ETHE are trusts but IBIT is an ETF and traded on a stock exchange while ETHE is not an ETF and is not traded on a stock exchange.

How do they work?

Cryptocurrency trusts, including IBIT and ETHE contain a bundle of coins, which firms keep in offline, “cold” storage. Each trust’s coins are stored separately (not commingled across the funds or with other assets) and are not lent out. When you buy a share of a trust, you own a portion of the trust, which provides indirect exposure to cryptocurrency. 

Risks to be aware of before investing:

  • ETHE has not been converted to an ETF and does not have the same creation and redemption mechanism that an ETF has. This means that the share price of the trust may vary from the value of its underlying assets (the cryptocurrencies)
  • Cryptocurrency may be more volatile than other investments and can be influenced by unpredictable external events that affect confidence in the crypto ecosystem
  • Cryptocurrency is at additional risk of electronic attacks

FAQs

Can I own cryptocurrency directly through Wealthfront?

No. At this time, we only offer exposure to cryptocurrency through trusts. You can’t own individual coins or add coins to a crypto wallet. We offer cryptocurrency as a diversification asset within a long-term investment strategy, not as a short-term investment or form of payment.

Why can’t cryptocurrency exceed 10% of my total portfolio value?

To help clients avoid creating an overly risky portfolio, you can’t set your cryptocurrency allocation, in the form of cryptocurrency trusts (ETHE) and ETFs (IBIT), to more than 10% of your portfolio’s total value. We consider cryptocurrencies, such as Bitcoin and Ethereum, and cryptocurrency trusts risky for a few reasons:

Cryptocurrency is significantly more volatile than most securities-based ETFs

Over the five-year period ending on October 31, 2022, SPY (the SPDR S&P 500 ETF Trust), a common measure of general market performance, experienced a realized volatility of 21.2%.1 Over the same time period, Bitcoin experienced a volatility of 77.9%, almost four times as volatile.2 High volatility may come with bigger upside, but also is more likely to create larger dips in value as well.

Cryptocurrency trusts have added risk from supply and demand in the marketplace

Unlike ETFs, trusts don’t have an efficient creation and redemption mechanism — the process that usually keeps the price of an ETF close to the value of its holdings. This means that the price of a cryptocurrency trust’s shares can differ significantly from the value of the underlying assets, especially when compared to ETFs. 

IBIT is an ETF, enabling it to more closely track the underlying asset, Bitcoin, and reduce the risk of a price discrepancy between the fund and the price of Bitcoin at a given time. 

Cryptocurrencies and cryptocurrency trusts are more susceptible to electronic attacks

Since cryptocurrency assets can be stored online, they can be “hacked” more easily than an ETF that holds stocks or bonds. However, 100% of Grayscale and BlackRock’s cryptocurrency assets are stored offline (“held in cold storage”), greatly reducing the risk of theft.

How are the coins inside the cryptocurrency trusts protected?

The cryptocurrency trusts that we offer hold 100% of the coins in the trusts in cold storage (offline), which is considered one of the most secure ways to store cryptocurrency. Grayscale and BlackRock do not lend the underlying coins out. Additionally, these assets are partially covered by insurance in the case of theft.

What accounts can I invest in cryptocurrency?

The cryptocurrency trusts are available to clients who have an Automated Investing Account. This includes both taxable and tax advantaged accounts like IRAs.


1. CRSP, Center for Research in Securities Prices, LLC, http://www.crsp.org/

2. FRED, Economic Research Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/CBBTCUSD

 

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