Acorns And Crypto: Invest In Digital Currency?

Cryptocurrency is a form of currency that only exists digitally. Bitcoin, the first and now the largest cryptocurrency, was founded in 2009 and is known for its volatility. Acorns is a spare-change savings tool that allows investors to allocate up to 5% of their investments towards a Bitcoin-linked ETF, further diversifying their long-term portfolio. This means that investors can gain exposure to Bitcoin without actually owning the cryptocurrency itself.

Investing in Bitcoin through Acorns

Acorns is a platform that allows you to invest your spare change into various cryptocurrencies of your choice. It offers a simple and automated way to start investing in Bitcoin and other cryptocurrencies. Here's a detailed guide on investing in Bitcoin through Acorns:

Understanding Acorns

Acorns is a micro-investing platform that rounds up your credit and debit card purchases to the nearest dollar and invests the spare change into the cryptocurrencies of your choice. It provides an easy and accessible way to invest in Bitcoin without requiring large sums of money upfront.

Getting Started with Acorns

To get started with Acorns, you can sign up on their website or mobile app. You will need to provide some basic information, such as your name, email address, and bank account details. Once your account is set up, you can link your credit and debit cards to start investing.

Choosing Your Investment Portfolio

Acorns offers different investment portfolios, including a sustainable ESG portfolio. You can choose the portfolio that aligns with your investment goals and risk tolerance. The platform will recommend a portfolio based on your age, income, and financial goals.

Acorns allows you to allocate a portion of your investments towards a Bitcoin-linked Exchange-Traded Fund (ETF). An ETF is a basket of investments that trades like a stock. The Acorns Bitcoin ETF is called ProShares Bitcoin Strategy (BITO), and it invests in Bitcoin futures rather than directly in Bitcoin. This means you are investing in the potential value of Bitcoin without actually owning the cryptocurrency itself.

Determining Your Investment Amount

With Acorns, you can choose how much you want to invest in the Bitcoin-linked ETF. The platform offers different portfolio types, such as Conservative, Moderate, and Aggressive, each with a predetermined allocation towards the Bitcoin ETF. For example, the Conservative portfolio targets a 1% allocation, while the Aggressive portfolio targets a 5% allocation.

Understanding the Risks

Diversification Benefits

Transaction Fees and Management

Investing in the Acorns Bitcoin ETF does not incur transaction fees. Instead, it typically charges a management fee of less than 1%. This cost is included in your Acorns subscription, and there are no surprise fees. You also don't need a digital wallet to invest in the Acorns Bitcoin ETF, simplifying the process.

In conclusion, investing in Bitcoin through Acorns provides a convenient and accessible way to gain exposure to Bitcoin. By allocating a portion of your investments towards a Bitcoin-linked ETF, you can diversify your portfolio and potentially reduce risk. However, it's important to understand the volatile nature of cryptocurrencies and carefully consider your financial situation before investing.

Bitcoin-linked ETFs

Acorns, for example, offers customers the option to allocate up to 5% of their portfolio to a Bitcoin-linked ETF. The specific ETF offered by Acorns is the ProShares Bitcoin Strategy ETF (BITO), which gained SEC approval in October 2021. This ETF invests in Bitcoin futures and is considered a high-risk investment due to the speculative and volatile nature of Bitcoin.

The benefits of investing in a Bitcoin-linked ETF through Acorns include streamlining the process by removing the need for extra apps, digital wallets, and passwords. It also allows investors to keep all their investments within the Acorns platform. Additionally, by investing in an ETF instead of directly in Bitcoin, investors can save on transaction fees.

It is important to note that a Bitcoin-linked ETF does not provide direct exposure to the price of Bitcoin, and there may be a tracking error where the performance of the ETF does not exactly match the current value of Bitcoin.

Bitcoin trading platforms

While Acorns does not allow users to invest directly in Bitcoin, it does provide access to a Bitcoin-linked ETF (BITO), which invests in Bitcoin futures. This is considered a high-risk investment given the volatile nature of cryptocurrencies.

If you are looking to invest directly in Bitcoin, there are several trading platforms that can be used. Here is a list of some of the best Bitcoin trading platforms:

• Cash App: Allows users to seamlessly and securely buy, sell, and store Bitcoin from their smartphones.
• Bisq: A decentralized exchange that allows users to buy and sell Bitcoin and other cryptocurrencies privately and securely.
• Coinbase: A beginner-friendly platform that offers a large number of cryptocurrencies, strong security, and advanced trading options.
• Crypto.com: Provides a vast ecosystem of digital assets, including its own blockchain, a native token, a crypto visa card, and yield-generating products.
• Kraken: A low-fee, professional-grade trading platform that offers advanced order types and supports margin and futures trading.
• Gemini: Emphasizes security and compliance, insures user funds, and provides a professional-grade trading dashboard.

When choosing a Bitcoin trading platform, it is important to consider factors such as security, fees, the range of cryptocurrencies offered, customer support, and regulatory compliance. It is also essential to understand the risks involved in investing in cryptocurrencies, as the market can be extremely volatile.

Bitcoin-related stocks

While Acorns does not allow direct investment in Bitcoin, it does provide exposure to Bitcoin through a Bitcoin-linked ETF, BITO, which is considered a high-risk investment given the volatile nature of cryptocurrencies.

If you are interested in investing in Bitcoin-related stocks, here are some options to consider:

Another way to gain exposure to Bitcoin in your portfolio is by investing in publicly traded companies that are involved in the Bitcoin ecosystem. These can include companies that engage in Bitcoin mining, operate cryptocurrency exchanges, or facilitate the buying and selling of Bitcoin. Here are some examples:

• Marathon Digital (MARA): One of the largest and most valuable pure-play Bitcoin mining companies. In the first quarter of 2023, they mined 2,195 BTC coins and held a total of 11,466 Bitcoins.
• CME Group Inc. (CME): CME Group was one of the first international stock exchanges to offer trading in Bitcoin futures, allowing a wide range of investors and exchange-traded funds to enter the crypto market.
• PayPal Holdings, Inc. (PYPL): PayPal is a leading technology platform that facilitates digital and mobile payments. It allows users to buy, sell, and transfer cryptocurrencies, including Bitcoin, and has its own digital wallet.
• Block, Inc. (SQ): Block, formerly known as Square, is a digital payment platform and the parent company of Cash App. It enables users to buy, sell, send, and receive Bitcoin. Block also holds a significant amount of Bitcoin on its balance sheet.
• Interactive Brokers Group Inc. (IBKR): Interactive Brokers is an international brokerage firm that offers trading in stocks, options, futures, and more. It provides customers with the ability to trade cryptocurrency futures.
• SoFi Technologies Inc. (SOFI): SoFi is a financial services company that offers a secure platform for trading cryptocurrencies, along with a range of other financial products such as private loans, mortgages, and banking services.

Bitcoin futures

Yes, you can invest in cryptocurrency on Acorns. The platform allows you to allocate up to 5% of your portfolio in a Bitcoin-linked ETF, which is considered a high-risk investment due to its volatile nature. This gives you exposure to Bitcoin by investing in its potential value without actually owning the cryptocurrency.

Now, here is some detailed information about Bitcoin futures:

Benefits of Bitcoin Futures:

• Enhanced Trading Strategies: Bitcoin futures allow traders to fine-tune their exposure to Bitcoin and enhance their trading strategies. For example, if a trader believes the price of Bitcoin will increase, they can buy a futures contract to profit from the expected price movement.
• Risk Management: Futures provide a way to hedge Bitcoin exposure. For example, if a trader is holding Bitcoin and worried about a price decline, they can sell Bitcoin futures contracts to lock in a selling price and protect against potential losses.
• Price Discovery: Trading Bitcoin futures contributes to efficient price discovery in transparent futures markets. This benefits all market participants by providing a clearer picture of the market and helping to determine the current value of Bitcoin.

Drawbacks and Risks of Bitcoin Futures:

• Volatility: Bitcoin and the cryptocurrency market are known for their high volatility. This means that the price of Bitcoin futures can fluctuate significantly, leading to potential gains or losses.
• Complex Nature: Trading derivatives like futures can be complex and may not be suitable for all investors. It is important to understand how futures work, the potential risks involved, and to carefully consider one's investment objectives before participating in this market.
• Margin Requirements: Trading futures often involves using leverage, which can amplify gains and losses. While this can be beneficial for experienced traders, it also introduces additional risk, and traders should be cautious when employing leverage in their strategies.

In summary, Bitcoin futures provide a way to gain exposure to Bitcoin's price movements without directly owning the cryptocurrency. They offer benefits such as enhanced trading strategies, risk management tools, and efficient price discovery. However, it is important to approach this market with caution due to the inherent volatility and complexity of derivatives trading.

Frequently asked questions