Fidelity's Bitcoin Investment Options: What You Need To Know

Investing in Bitcoin and other cryptocurrencies has become increasingly popular, and many investors are looking to add crypto to their portfolios. Fidelity, a well-known investment firm, has recognized this growing interest and now offers its clients the ability to trade and invest in cryptocurrencies like Bitcoin and Ethereum. In this article, we will explore the opportunities available for investing in Bitcoin through Fidelity and discuss the advantages and considerations of doing so.

How to start trading Bitcoin with Fidelity

Fidelity offers a service called Fidelity Crypto®, which allows you to trade and secure crypto like bitcoin and ethereum for as little as as little as $1. You can open a Fidelity Crypto® account if you're a US citizen over the age of 18 and reside in a state where Fidelity Digital Assets℠ can serve customers.

Here's how to start trading:

• Open a Fidelity Crypto® account in just minutes. You will also need to open an eligible Fidelity brokerage account to fund your new crypto account if you don't already have one.
• Tell Fidelity how much crypto you want to buy or sell as a market or limit order.

It's important to note that crypto is a highly volatile asset class that can become illiquid at any time and is for investors with a high-risk tolerance. Before investing in crypto, consider making sure you understand what cryptocurrencies are and how they work.

The risks of investing in Bitcoin

Yes, you can invest in Bitcoin on Fidelity. However, it is important to note that investing in cryptocurrencies like Bitcoin comes with significant risks. Here are some key risks associated with investing in Bitcoin:

Volatile and Fluctuating Market:

Bitcoin's price is highly volatile and constantly fluctuating. The value of Bitcoin can change rapidly, and there is no guarantee of a return on investment. The unpredictable nature of the market makes it crucial for investors to closely monitor it and make small, cautious investments.

Cyberattacks and Fraud:

As a technology-dependent investment, Bitcoin is vulnerable to cyberattacks and hacking. If bitcoins are lost or stolen, there is often no way to retrieve them. Additionally, fraudulent exchanges and scams are prevalent in the Bitcoin market, posing significant risks to investors.

Lack of Regulation:

The Bitcoin market currently operates with little to no major regulations. The lack of a clear governmental stance on cryptocurrency adds uncertainty to the market. While the absence of taxation may be appealing, it could also lead to future problems if Bitcoin competes with government-issued currencies.

Technology Reliance and Cybersecurity:

Bitcoin is entirely reliant on technology, and any disruptions or failures can impact its value. As a digital asset, Bitcoin is susceptible to online theft and cybersecurity threats. Investors need to be vigilant about protecting their investments and understanding the associated risks.

Market Manipulation:

The crypto industry is more susceptible to market manipulation than traditional securities. The lack of regulatory oversight and the anonymous nature of transactions can make it easier for individuals or groups to manipulate the market, potentially impacting the value of Bitcoin.

High-Risk Investment:

Bitcoin is considered a high-risk investment due to its volatility and the potential for rapid value loss. It may not be suitable for risk-averse investors or those seeking stable, long-term investments.

Limited Regulatory Protections:

Direct investments in Bitcoin do not offer the same regulatory protections as registered securities. The regulatory environment for crypto is still evolving, and investors may not have the same legal recourse in the event of issues or disputes.

Lack of Insurance:

Bitcoin investments are not insured by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. This means that if an exchange or platform fails or goes out of business, investors may not have recourse to recover their funds.

Digital Security and Wallet Management:

The security of digital wallets and the safe storage of access keys are critical for Bitcoin investors. Losing access to a wallet or misplacing a key can result in the permanent loss of bitcoins.

Competition and Adoption:

The success of Bitcoin depends on its widespread adoption and acceptance as a legitimate currency. If companies and individuals do not recognize and accept Bitcoin as a viable form of payment, its value and utility may diminish over time.

The benefits of investing in Bitcoin with Fidelity

Investing in Bitcoin with Fidelity offers several benefits to investors. Here are some key advantages:

Ease of Access and Low Barrier to Entry:

Fidelity allows you to start investing in Bitcoin with as little as $1. This low barrier to entry makes it accessible to a wide range of investors, from beginners to experienced traders. The platform also provides a user-friendly interface, making it easy for investors to navigate and execute trades.

Security and Reliability:

Fidelity prioritizes security and reliability, offering robust protection for your investments. They have expertise in security measures and provide reliable support to help you securely access and manage your Bitcoin investments. This includes rigorous physical, operational, and cyber protection protocols to safeguard your assets.

Educational Resources:

Fidelity places a strong focus on education, providing a range of resources to help you make informed decisions about investing in Bitcoin. They offer news, articles, podcasts, webinars, and on-demand educational content. This empowers you to enhance your crypto knowledge and make more strategic investment choices.

Integrated Investment Platform:

Fidelity allows you to manage both your traditional and crypto investments in one place. The Fidelity® mobile app integrates your crypto and traditional investments, providing a seamless experience. This convenience enables you to have a comprehensive view of your portfolio and make more efficient investment decisions.

Institutional-Level Services:

Fidelity Digital Assets, the company behind Fidelity Crypto, has been a leader in the crypto space for nearly a decade. They offer institution-level security and services, leveraging their experience and expertise in the industry. This provides investors with added confidence and peace of mind.

Exploring Emerging Opportunities:

With Fidelity, you can explore a growing number of opportunities in the emerging cryptocurrency universe. They offer various investment options, including exchange-traded funds (ETFs) focused on digital assets. This allows you to diversify your crypto investments and potentially mitigate risks associated with individual cryptocurrencies.

Remember, investing in Bitcoin and other cryptocurrencies carries a high level of risk due to their volatility and susceptibility to market manipulation. Be sure to carefully consider these risks and consult appropriate financial advisors before making any investment decisions.

The costs of investing in Bitcoin with Fidelity

Investing in Bitcoin with Fidelity is a straightforward process, but there are some costs to be aware of. Here is an overview of the costs associated with investing in Bitcoin through Fidelity:

Account and Trading Fees

Fidelity offers a Fidelity Crypto® account, which allows users to trade and secure cryptocurrencies like Bitcoin and Ethereum. There is no minimum deposit required to open a crypto trading account, and the minimum crypto purchase amount is $1. Fidelity describes its crypto trading as "commission-free", but it is important to note that they do take a spread of up to 1% on crypto trades. This spread is relatively competitive compared to other crypto service providers.

Limited Cryptocurrency Options

Fidelity currently only offers two cryptocurrencies: Bitcoin and Ethereum. This limited selection may be a drawback for investors who are looking for a wider range of crypto options. Other cryptocurrency platforms, like Crypto.com, offer over 300 cryptocurrencies, while SoFi provides around 20.

Lack of Advanced Features

Fidelity's crypto platform does not offer some of the advanced features available on competing exchanges. For example, it does not allow staking, a process that enables holders of certain cryptocurrencies to earn rewards similar to interest. Additionally, crypto transactions are limited to specific hours (4 a.m. to 12 a.m. Eastern Time) and cannot be made outside of this timeframe.

Transfer and Withdrawal Limitations

One significant consideration is that users cannot transfer cryptocurrency out of their Fidelity accounts or to external crypto wallets. This limitation may be a deal-breaker for those who want to use crypto for payments or access blockchain-based services. However, it is possible to sell crypto for fiat money.

Volatility and Risk

Investing in cryptocurrencies like Bitcoin carries a high level of risk due to their volatile nature. The value of cryptocurrencies can fluctuate significantly, and there is a possibility that their value could drop to zero. Therefore, it is crucial to only invest an amount that you are willing to lose.

In summary, while Fidelity offers a straightforward and relatively low-cost entry point for investing in Bitcoin, there are some costs and limitations to be aware of. These include account and trading fees, a limited selection of cryptocurrencies, a lack of advanced features, transfer and withdrawal constraints, and the inherent volatility and risk associated with crypto investments.

The availability of investing in Bitcoin with Fidelity

Investing in Bitcoin with Fidelity is available to US citizens over the age of 18 who reside in a state where Fidelity Digital Assets can serve customers. The company offers a service called Fidelity Crypto, which allows users to trade and secure Bitcoin and Ethereum for as little as $1. This service is built into the Fidelity mobile app, allowing users to access both their traditional and crypto investments in one place.

Fidelity Crypto is not available in every state, and currently only offers two cryptocurrencies: Bitcoin and Ethereum. It is important to note that users cannot send or receive cryptocurrency from their accounts, and trading is limited to 4 am to 12 am Eastern Time.

Fidelity also offers two crypto funds: the Fidelity Wise Origin Bitcoin Fund and the Fidelity Ethereum Fund. These funds provide investors with the opportunity to gain exposure to the price of Bitcoin and Ethereum, respectively, without buying the cryptocurrencies directly. These funds can be invested in using a Fidelity brokerage account, including an IRA.

In addition to the above, there are three main ways that retail investors can gain exposure to crypto through Fidelity: buying crypto directly, buying crypto ETPs or crypto-related ETFs, or buying crypto stocks.

Frequently asked questions