Schwab Bitcoin Investment: Is It Possible?

Bitcoin and other cryptocurrencies have been growing in popularity for years, and while Charles Schwab does not currently support direct purchases of any digital currencies, investors can gain exposure to the crypto market through the platform in several ways.

One way is through the Schwab Crypto Thematic ETF, which provides global exposure to companies that may benefit from the development or utilisation of cryptocurrencies (including Bitcoin) and other digital assets. Another way is through spot Bitcoin ETFs, which are available at Schwab. Additionally, 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 in the Morningstar category Digital Assets using the Schwab Fund Finder tool.

It is important to note that investing in cryptocurrencies is considered highly speculative and may be subject to extreme price volatility, illiquidity, and increased risk of loss.

Charles Schwab does not support direct Bitcoin purchases

Another option is to invest in spot Bitcoin ETFs, which are available at Schwab. These funds invest in cryptocurrencies, cryptocurrency futures contracts, or equities related to cryptocurrencies. Clients can find these in the Morningstar category "Digital Assets" using the Schwab Fund Finder tool.

Additionally, cryptocurrency-related ETFs are available, which do not invest directly in cryptocurrencies but may invest in companies that operate in the digital asset and cryptocurrency ecosystem. For example, these may include companies that offer trading, custody, or mining of cryptocurrencies.

It is important to note that investing in cryptocurrencies is considered speculative and high-risk. The market is highly volatile, and there is a potential for significant financial loss. Therefore, investors should carefully consider their goals and the risks involved before investing.

The Schwab Crypto Thematic ETF offers investors exposure to Bitcoin

Charles Schwab does not currently support the direct buying, trading, or ownership of cryptocurrencies like Bitcoin on its platform. However, investors can gain exposure to Bitcoin through the Schwab Crypto Thematic ETF. This ETF is designed to offer global exposure to companies that may benefit from the development or utilisation of cryptocurrencies and other digital assets, as well as the business activities connected to blockchain and other distributed ledger technology.

The Schwab Crypto Thematic ETF does not invest directly in any cryptocurrency or digital asset. Instead, it focuses on providing access to companies operating in the digital asset and cryptocurrency ecosystem. These companies may offer services such as trading, custody, or mining of cryptocurrencies. By investing in these companies, investors can gain indirect exposure to the growth and development of the cryptocurrency market, including Bitcoin.

This type of investment approach can be suitable for those who want to gain exposure to the crypto market without directly purchasing or trading cryptocurrencies. It provides a way to potentially benefit from the growth of the industry while diversifying risk across multiple companies.

It is important to note that the Schwab Crypto Thematic ETF carries risks, just like any other investment. Cryptocurrency-related investments are considered speculative and high-risk due to their volatility and the lack of regulatory infrastructure. Investors should carefully consider their investment goals and risk tolerance before deciding to invest in the Schwab Crypto Thematic ETF or any other cryptocurrency-related product.

Spot Bitcoin ETFs are available at Schwab

As of 2024, investors can now access spot bitcoin exchange-traded funds (ETFs) through Charles Schwab. This development represents a significant milestone in the history of bitcoin and the investment industry.

To find these spot bitcoin ETFs, Schwab clients can use the Fund Finder tool and look under the Morningstar category "Digital Assets". It is important to note that these products are for informational purposes only and should not be considered individualized recommendations.

While the approval of spot bitcoin ETFs by the Securities and Exchange Commission (SEC) indicates a shift towards embracing cryptocurrencies, it is important to approach these investments with caution. The value of cryptocurrencies like bitcoin has been volatile, and the market is not as transparent as more traditional investments. Additionally, transactions are irreversible, consumer protections are minimal, and regulators have not yet clarified their approach to regulating them.

Before investing in spot bitcoin ETFs, it is essential to understand the structure and management of these financial products, as they carry substantial risks.

Charles Schwab offers several choices for gaining exposure to the cryptocurrency markets

Charles Schwab does not support the direct buying, trading, or ownership of cryptocurrencies on its platform. However, it does offer several choices for gaining exposure to the cryptocurrency markets. Here are some of the options available:

Cryptocurrency-related ETFs

The SEC has approved several spot bitcoin ETFs that began trading in January 2024. These ETFs invest directly in bitcoin or other cryptocurrencies, rather than derivatives such as futures. While these ETFs carry a substantial level of risk and are not suitable for all investors, they provide an opportunity for investors to gain exposure to the cryptocurrency markets.

Cryptocurrency-related Mutual Funds

Mutual funds are available that provide exposure to spot cryptocurrency, cryptocurrency futures contracts, and companies focused on servicing the cryptocurrency market. These funds invest in cryptocurrencies, cryptocurrency futures, or equities related to cryptocurrencies.

Cryptocurrency Coin Trusts

These products allow investors to trade shares in trusts holding large pools of a cryptocurrency. Examples include Grayscale Bitcoin Cash Trust, Grayscale Digital Large Cap Fund, and Bitwise 10 Crypto Index Fund. However, these trusts can trade at a premium/discount to net asset value (NAV), involve high volatility, hefty fees, and other risks.

Cryptocurrency Futures

Clients with a futures account can trade cryptocurrency futures contracts directly. These 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. Examples include COIN, SI, MSTR, SQ, and PYPL.

Bitcoin is the most popular cryptocurrency

Bitcoin is the most well-known and popular cryptocurrency, allowing for direct peer-to-peer exchange of value on a decentralised payment network. It is a distributed peer-to-peer digital currency that can be transferred instantly and securely between any two people in the world who accept Bitcoin.

Bitcoin was released in 2009 as an open-source software, which means that anyone can examine the code and add to the Bitcoin network. It is decentralised, so no central authorities, such as banks or political institutions, control the amount of Bitcoin in circulation.

Bitcoin uses public-key cryptography and proof-of-work to process and verify payments. Bitcoins are sent (or signed over) from one Bitcoin address to another, with each user potentially having many addresses. Each payment transaction is broadcast to the network and included in the Bitcoin blockchain so that the same bitcoins cannot be spent twice.

The Bitcoin blockchain is a shared record of every transaction ever made on its digital accounting book. When person A sends Bitcoin to person B, this transaction is added to a public ledger. This ledger is stored in multiple copies throughout the network, and to update one is to update them all.

Bitcoin is unique as a cryptocurrency because it is infinitesimally divisible. If you wanted to transfer just 0.00000001 bitcoins, you could, which makes the number of 21 million Bitcoins pretty much arbitrary.

The world is still figuring out how to regulate Bitcoin as it poses a direct threat to the government-central bank monopoly on money creation. Bitcoin is not backed by any regulatory agency, government, or central authority since it is a decentralised currency. This makes it hard to be regulated by authorities whose powers change in each jurisdiction.

Charles Schwab does not currently allow clients to buy or sell individual cryptocurrencies directly in a Schwab account. However, there are several choices for gaining exposure to cryptocurrency markets. These include cryptocurrency-related ETFs and mutual funds, cryptocurrency futures, and cryptocurrency stocks.

Frequently asked questions