M1 Finance: Can You Invest In Bitcoins?

Bitcoin is the world's best-performing asset class over the past 10 years, and investing in it has become increasingly popular. M1 Finance is a combination of self-managed funds and Robo-investing, allowing users to invest for free without trade or account management fees. While M1 Finance does not offer cryptocurrency trading, it does allow investors to gain exposure to Bitcoin and other cryptocurrencies through exchange-traded funds (ETFs), trusts, mining firms, and public companies that hold Bitcoin. For example, the ProShares Bitcoin Strategy ETF (BITO) listed on the New York Stock Exchange in October, allowing investors to gain derivative exposure to Bitcoin. Additionally, blockchain ETFs provide diversified exposure to the crypto industry by investing in companies developing or using blockchain technology. It is important to note that investing in cryptocurrencies carries significant risk and may not be suitable for everyone.

Investing in Bitcoin through M1

M1 Finance is a combination of self-managed funds and Robo-investing. The platform allows users to invest for free and choose what companies they want to invest in and what percentage. M1 Finance does not charge commission, trading, or management fees for self-directed brokerage accounts.

M1 Finance does not offer cryptocurrency trading directly. However, since last year, anyone with an M1 Invest brokerage account can have exposure to cryptocurrency holdings through exchange-traded funds (ETFs), trusts, mining firms, and public companies that hold Bitcoin.

For example, the ProShares Bitcoin Strategy ETF (BITO) listed on the New York Stock Exchange in October. BITO invests in cash-settled, front-month bitcoin futures. Owning crypto ETFs does not mean you own the digital currencies. Instead, futures contracts provide derivative exposure to the underlying asset, in this case, Bitcoin.

Another way to get diversified exposure to the emerging crypto industry is through blockchain ETFs. These ETFs invest in hundreds of companies developing or using blockchain technology, ranging from large established public companies to smaller blockchain-focused companies.

You can also invest in cryptocurrency trusts, such as the Grayscale Bitcoin Trust (GBTC). While these trusts offer exposure to cryptocurrency investing, they are susceptible to tracking errors and require fees.

Additionally, you can invest in publicly traded crypto mining-related companies, including Riot Blockchain Inc (RIOT) and Marathon Digital Holdings Inc (MARA). By investing in these companies, you get indirect exposure to crypto assets within the portfolio of a company with business lines unrelated to crypto.

It is important to note that investing in Bitcoin and other cryptocurrencies is considered a volatile asset class and may not be suitable for everyone. Before investing, it is essential to research, know your risk tolerance, and consider your investment strategy.

Pros and cons of investing in crypto

Yes, you can invest in Bitcoin and other cryptocurrencies on M1. M1 offers a Crypto Account for clients who have funded their existing M1 Brokerage Account.

Pros:

• Crypto enables the online transfer of value without the need for intermediaries like banks. This allows for the transfer of value globally with low fees, almost instantly, 24 hours a day, 7 days a week, with no holidays.
• Crypto provides exposure to an uncorrelated asset class.
• Crypto is supported by secure, decentralized blockchain technology, independent of traditional banking systems.
• Crypto trades around the clock, giving investors the ability to generate returns outside of normal working hours.
• Crypto could help investors beat inflation as the number of coins is capped, preventing inflation.
• Crypto has the potential to provide financial services to the unbanked and underbanked populations around the world, increasing financial inclusion.
• Crypto transactions are encrypted, ensuring privacy and reducing the risk of fraud and scams.

Cons:

• Crypto holdings can be very volatile compared to other asset classes.
• Crypto hasn't yet been proven as a long-term investment.
• Crypto exchanges are not yet regulated in the same way as centralized exchanges, and there are security vulnerabilities that may pose significant risks, especially to new investors.
• Crypto has serious scalability issues and can be difficult to roll out on a large scale.
• The rules and regulations around crypto are still evolving, creating uncertainty for investors and businesses.
• The crypto market is highly volatile, and it is challenging to predict when values will rise or fall.
• While crypto is very safe, exchanges are not, and there is a risk of hacks and theft.
• Crypto can be used for illegal activities, and it is difficult for authorities to track users due to its high level of security and anonymity.

As with any investment, it is important to do your own research and carefully consider the risks and rewards before investing in crypto.

Crypto ETFs

One example of a crypto ETF is the ProShares Bitcoin Strategy ETF (BITO), which listed on the New York Stock Exchange in October. BITO invests in cash-settled, front-month bitcoin futures, meaning it buys contracts for the next month when the current contracts mature. Investing in BITO is attractive to some investors as it provides access to cryptocurrency through a regulated exchange-traded product. However, it is important to note that ProShares collects 0.95% in fees for this service.

Another type of crypto ETF is the blockchain ETF, which provides diversified exposure to the crypto industry by investing in companies developing or utilising blockchain technology. Examples of blockchain ETFs available on M1 include the Amplify Transformational Data Sharing ETF (BLOK), the Bitwise Crypto Industry Innovators ETF (BITQ), and the Global X Blockchain ETF (BKCH). These ETFs offer investors a way to invest in the underlying technology of cryptocurrencies without directly investing in the currencies themselves.

While crypto ETFs provide a more regulated and secure way to invest in cryptocurrencies, it is important to consider the risks associated with the volatile nature of the crypto market. Cryptocurrencies are still considered speculative investments, and their long-term viability has yet to be proven. Additionally, the regulatory landscape for crypto ETFs is constantly evolving, and investors should stay informed about any changes that may impact their investments.

Crypto Accounts

M1 calls portfolios "Pies", and one account can hold several. Pies help you stay organized and make fine-tuning a strategy easy. You can create custom Pies, use M1's, or do both. Set a target percentage for each Pie in your account and turn on automated trading to work towards your targets. Crypto Pies are created the same way a Pie is made from stocks and ETFs within your M1 Brokerage Account. Choose the coins you want as Slices, then allocate a certain percentage of your Pie to each.

M1 offers advanced automation tailored to you, including weekend and on-demand trading. Crypto trades 7 days a week, and with every deposit, M1 automatically invests in the holdings that bring your account closer to its targets. You can also schedule manual rebalances. M1 also offers total control, allowing you to seamlessly manage multiple accounts in one app, including retirement, crypto, brokerage, and more.

M1 provides secure crypto storage. Your crypto assets will be held in a custodial wallet powered by Bakkt. However, it's important to note that M1 and Apex Crypto do not support direct transfers from one wallet to another. If you plan to move your crypto to cold storage or another account, you will need to sell your crypto positions and withdraw cash to a linked bank account.

Bitcoin's value and volatility

Bitcoins Value and Volatility

Bitcoin is a highly volatile asset, and its value is influenced by several factors, including supply and demand, investor sentiment, media hype, and government regulations.

Supply and Demand

Like most commodities, the price of Bitcoin is heavily influenced by supply and demand. As Bitcoin has a limited supply of 21 million coins, its price is affected by how many coins are in circulation and how much people are willing to pay. As the supply gets closer to the limit, prices are likely to climb higher.

Investor Sentiment and Media Hype

Speculation about price movements plays a critical role in Bitcoin's value. Media outlets, influencers, and industry leaders create investor concerns or enthusiasm, leading to price fluctuations. Fear and greed are primary drivers of Bitcoin's volatility, as investors fear missing out on significant price swings.

Government Regulations

Government agency views and regulations can also impact Bitcoin's price. For example, China's ban on cryptocurrency transactions in 2021 affected Bitcoin's price. The approval of bitcoin-related securities by brokerages and companies can also influence its value.

Comparison to Other Currencies and Assets

Bitcoin's volatility is extreme and almost ten times higher than the volatility of major exchange rates (US dollar against the euro and the yen). Gold, a traditional store of value, has an average volatility of around 1.2%, while other major currencies average between 0.5% and 1.0%.

Impact on Usage

Bitcoin's high volatility affects its potential as a medium of exchange and a store of value. The extreme price fluctuations make it challenging to use Bitcoin as a stable means of payment or a reliable store of value over short periods. However, over very long horizons, Bitcoin can be considered a store of value, as its long-term price trend is positive.

Investing in Bitcoin through M1

M1 offers a unique interface called Pies, which allows users to invest automatically in custom portfolios of stocks, ETFs, and cryptocurrencies, including Bitcoin, commission-free. M1 provides a Crypto Account for clients with a funded Invest Account. It is important to note that investing in cryptocurrency is a personal decision and comes with significant risks.

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