Cryptocurrency Investing
Looking for spot bitcoin ETFs or spot ether ETFs? Schwab clients can find them in the Morningstar category "Digital Assets" using Schwab's Fund Finder tool. Go to Fund Finder > Options on select spot bitcoin ETFs are now available, with individual contracts listed on the options chain of those ETFs.
Ways to invest in cryptocurrency at Schwab
For investors interested in cryptocurrency, Schwab has several choices for gaining exposure to cryptocurrency markets, though spot trading of cryptocurrency is not currently available.
Cryptocurrency-related ETFs and Mutual Funds
Exchange-traded funds (ETFs) and mutual funds are available that provide exposure to spot cryptocurrency, cryptocurrency futures contracts, and companies focused on servicing the cryptocurrency market.
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Schwab Crypto Thematic ETF
Our Schwab Crypto Thematic ETF is designed to deliver global exposure to companies that may benefit from the development or utilization of cryptocurrencies (including Bitcoin) and other digital assets, and the business activities connected to blockchain and other distributed ledger technology.
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Additional ETFs & Mutual Funds
Clients looking for spot bitcoin ETFs or spot ether ETFs can find these and other third-party ETF and mutual fund products available at Schwab. These funds invest in cryptocurrencies, cryptocurrency futures contracts, or equities related to cryptocurrencies. You can find them in the Morningstar category "Digital Assets" using Schwab's Fund Finder tool.
Cryptocurrency Coin Trusts
These products allow investors to trade shares in trusts holding large pools of a cryptocurrency, although these can trade at a premium/discount to net asset value (NAV), involve high volatility, hefty fees, and other risks. They trade over-the-counter (OTC) and behave like closed-end funds. Here are just a few examples:
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Grayscale Bitcoin Cash Trust
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Grayscale Digital Large Cap Fund
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Bitwise 10 Crypto Index Fund
Cryptocurrency Futures
Clients with a futures account can trade cryptocurrency futures contracts directly. Traded contracts are settled in cash, not cryptocurrency.
Cryptocurrency Stocks
Some stocks provide indirect exposure to cryptocurrency due to the company's relationship to digital assets. Here are just a few examples:
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Coinbase
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MicroStrategy
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Visa
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PayPal
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Riot Platforms
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Beyond
What is cryptocurrency?
Cryptocurrency is a virtual currency secured through one-way cryptography. It appears on a distributed ledger called a blockchain that's transparent and shared among all users in a permanent and verifiable way that's nearly impossible to fake or hack into. The original intent of cryptocurrency was to allow online payments to be made directly from one party to another without the need for a central third-party intermediary like a bank. However, with the introduction of smart contracts, non-fungible tokens, stablecoins, and other innovations, additional uses and capabilities for cryptocurrency are rapidly evolving. Cryptocurrencies are not FDIC insured and are not protected by SIPC or CFTC regulations.
Popular Types of Cryptocurrencies
Bitcoin (BTC)
Bitcoin, the most well-known cryptocurrency, allows for direct peer-to-peer exchange of value on a decentralized payment network.
Ether (ETH)
Ether is a cryptocurrency that is native to the Ethereum blockchain and network. The Ethereum blockchain allows users to create programmable "smart contracts" which execute only after certain conditions are met between two or more parties.
How does cryptocurrency get its value?
Cryptocurrency's value stems from a combination of scarcity and the perception that it is a store of value, an anonymous means of payment, or a hedge against inflation. Cryptocurrency investors can buy or sell them directly in a spot market, or they can invest indirectly in a futures market or by using investment products that provide cryptocurrency exposure.
Schwab's perspective
We suggest that clients who are interested in cryptocurrency approach them as speculative investments and consider their goals as well as the risks involved. For those who already have a diversified portfolio and a long-term investment plan, we see cryptocurrency as being used primarily for trading purposes outside the traditional portfolio. Read more about our perspective on spot bitcoin ETFs and spot ether ETFs here.
Here are some aspects to consider about cryptocurrency investing in general, as well as differences between investing directly in the spot market vs. indirectly.
Cryptocurrency Investing table
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BenefitsBenefits>RisksRisks>
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Cryptocurrency Investing>BenefitsPotential for appreciation>
Some investors are attracted to the volatile price swings as a potential for profit.Portfolio diversification
Some investors believe that if the lack of correlation with other asset classes continues, cryptocurrency could add diversification to a portfolio.RisksPotential for financial loss>
Cryptocurrency prices historically have been highly volatile, and fluctuations could result in significant financial losses regardless of whether you have direct or indirect exposure.-
Direct Investing (spot market) Considerations>BenefitsTransaction transparency>
The use of blockchain records transactions between parties in a verifiable and permanent way visible to all.24/7 access
Unlike traditional exchange-traded products, cryptocurrency can be bought or sold at any time.Control
With self-custody and blockchain interoperability, cryptocurrency provides substantial user autonomy outside of traditional financial networks.RisksPotential for fraud>According to the Federal Trade Commission, "Many people have reported being lured to websites that look like opportunities for investing in or mining cryptocurrencies, but are bogus."Unregulated spot marketsSpot markets on which cryptocurrencies trade are relatively new and largely unregulated, and therefore, may be more exposed to fraud and security breaches than established, regulated exchanges for other financial assets or instruments.Lack of recoverabilityCryptocurrency assets are accessed using a key that's not retrievable if lost. Similarly, if you lose access to the place where you store your key, you will effectively lose possession of your cryptocurrency.-
Indirect Investing Considerations>BenefitsRegulation>The investment products offered at Schwab provide an element of regulation and consumer protections that spot trading lacks.RecoverabilityAccess to conventional investment accounts can usually be recovered if your credentials are misplaced.RisksHigh expenses for trusts and funds>Cryptocurrency trusts and mutual funds can involve high expenses, with fees exceeding 2% or more of the investment.Leverage risk for futuresCryptocurrency futures are leveraged products, meaning you could lose more than you initially invested, quickly and with relatively small price movements in the underlying futures product.1
1. Virtual currencies including, but not limited to, bitcoin and ether experience significant price volatility, and fluctuations in the underlying virtual currency's value between the time you place a trade for a virtual currency futures contract and the time you attempt to liquidate it will affect the value of your futures contract and the potential profit and losses related to it.
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Common questions
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Digital currency refers to any currency that exists online. Virtual currency is a digital representation of value and subset of digital currency. Cryptocurrency is a subset of virtual currency and bitcoin and ether are types of cryptocurrency.
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Like many new technologies or products, cryptocurrency has attracted adherents interested in innovation and the perceived absence of governmental control. Traders saw it as an alternative to traditional investments such as stocks, bonds, and cash, and trading momentum led to a rising, if highly volatile, price. All of this attracted media attention, which drove mainstream awareness and, ultimately, increasing acceptance. Major companies, including Microsoft, PayPal, and Overstock now accept bitcoin as a form of payment.
The decentralized nature of cryptocurrency appeals to many investors. Others may be attracted to the volatility and potential for price appreciation that may outpace those of stocks. For example, a single bitcoin ranged in price from $17,000 in early 2023 to a 52-week high of over $73,000 in March 2024, with intense volatility in between.
Ether is a cryptocurrency that can be exchanged on the Ethereum blockchain. It is popular due to its speed of executing transactions, often several times faster than bitcoin. Ethereum also supports "smart contracts" which allows for quick execution and verification of financial and other types of contracts. Unlike bitcoin, the supply of ether is not finite.
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Cryptocurrencies are speculative investments, with significant volatility of cryptocurrency prices and the prices of indirect investments that have exposure to the cryptocurrency market. Cryptocurrency doesn't fit within traditional asset allocation models, as it is neither a traditional commodity, such as gold, nor a traditional currency. Its volatility is driven primarily by supply and demand, not inherent value. Bitcoin, for example, doesn't have earnings or revenues. It doesn’t have a price-to-earnings ratio, price-to-sales ratio, or book value. Traditional value metrics don't apply, so there are no methods for assessing its value that we endorse or find persuasive beyond the trading value. Considering its volatility and the possibility that the entire value of a cryptocurrency investment could disappear, investors who don’t think they could handle the market swings might want to steer clear.
There is also cryptocurrency risk besides volatility, as no regulatory infrastructure is in place for cryptocurrencies. Nothing exists yet to back you up like the Federal Deposit Insurance Corporation does for U.S. bank customers. That means investors are entirely responsible for the security of any cryptocurrency spot holdings. The SEC has noted that with cryptocurrencies, there is "substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation."
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Though you can get exposure to cryptocurrencies in multiple ways at Schwab—trusts, futures, ETFs, and individual equities—you cannot currently buy or sell individual cryptocurrencies directly in a Schwab account.
We understand there is some client interest and engagement in cryptocurrencies, and we are looking closely and cautiously at this space. Clarity from regulators will be important before we consider offering a retail cryptocurrency experience. If we do, you can expect it to be designed to support client need and surrounded by the advice and education our clients have come to expect and deserve from us.
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No, Schwab does not accept cryptocurrency deposits, nor do we accept or disburse cryptocurrencies for settlement of securities or futures transactions.
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ETFs available at Schwab provide exposure to spot cryptocurrencies, cryptocurrency futures contracts, and to companies that are focused on servicing the cryptocurrency market and digital assets.
Schwab Asset Management also offers the Schwab Crypto Thematic ETF that provides global exposure to companies that may benefit from the development or utilization of cryptocurrencies and other digital assets, and the business activities connected to the blockchain and other distributed ledger technology. This ETF does not invest directly in any cryptocurrency or digital asset.
These ETFs, as well as cryptocurrency or digital asset-related ETFs that the SEC may approve in the future, can be found in the Morningstar category "Digital Assets" using Schwab's ETF Fund Finder tool.
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Yes, a futures account is required to trade Bitcoin futures contracts, and certain requirements must be met to trade futures. Clients can log in and apply online to open a futures account.
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The IRS treats cryptocurrency as property, not currency. Transactions in cryptocurrency spot markets are thus considered taxable by the Internal Revenue Service (IRS) whenever a taxable event occurs, such as selling cryptocurrency for a fiat currency (i.e., U.S. Dollars, Euros, etc.) or when traded for another asset. Investors are responsible for tracking cost basis, gains, and other reporting. If you have questions or concerns about the potential tax implications of transacting in cryptocurrencies, you should refer to this IRS publication or consult with a tax advisor.
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Blockchain is the underlying technology that supports cryptocurrencies. It is an open-source, public record-keeping system operating on a decentralized computer network that records transactions between parties in a verifiable and permanent way. Blockchain provides accountability, as the records are intended to be immutable, which presents potential applications for many businesses. While blockchain has often been associated with cryptocurrency, it has many potential uses beyond payments, including smart contracts, supply chain management, and financial services. Note that ownership of cryptocurrencies is not an investment in blockchain, the technology, or its current or future uses.
Want to learn more?
Check out Schwab's insights about cryptocurrency.