Fidelity's Crypto Offerings: Exploring Investment Opportunities

Fidelity allows its customers to invest in cryptocurrencies like Bitcoin and Ethereum through its platform, Fidelity Crypto. This platform offers an easy entry point for investors to access the emerging crypto market with as little as $1. However, it is important to note that crypto is a highly volatile asset class and is not suitable for everyone. Fidelity's crypto platform is currently available in 35 states, and users cannot transfer cryptocurrencies out of their accounts.

Fidelity Crypto®: Buy and sell crypto like bitcoin and ethereum with as little as $1

Fidelity does allow customers to invest in cryptocurrencies like Bitcoin and Ethereum through its Fidelity Crypto® platform.

Fidelity Crypto® is a platform that allows users to trade and secure crypto like bitcoin and ethereum directly with as little as $1. It is built into the award-winning Fidelity® mobile app, so users have access to both their traditional and crypto investments in one place.

Fidelity Crypto® is offered by Fidelity Digital Assets, which has been in the crypto space since 2014. The platform provides institution-level security and services and is available to US citizens over the age of 18 residing in eligible states.

Fidelity Crypto® is designed to make crypto investing more accessible, with a focus on education and security. Users can open a Fidelity Crypto® account in minutes, and the platform offers 24/7 virtual assistance.

It is important to note that crypto is a highly volatile asset class and is not suitable for all investors. Cryptocurrencies are subject to rapid price fluctuations and are not insured by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. As such, investors could lose their entire investment, and it is recommended to only invest an amount you are willing to lose.

Fidelity® Wise Origin® Bitcoin Fund (FBTC): Invest in bitcoin without buying it directly

Fidelity does allow crypto investments. The company has been an innovator in crypto since 2014, when it began mining bitcoin. In 2018, Fidelity launched its first crypto service: Fidelity Digital Assets, an institutional custody and trading platform for digital assets.

The Fidelity® Wise Origin® Bitcoin Fund (FBTC) is an exchange-traded product that offers investors exposure to bitcoin without buying it directly. FBTC is not an investment company registered under the Investment Company Act of 1940 and is not subject to regulation under the Commodity Exchange Act of 1936. As a result, shareholders of FBTC do not have the same protections as owners of shares in an investment company registered under the 1940 Act or investors in a CEA-regulated instrument or commodity pool.

FBTC is a high-risk investment product that holds a single asset, bitcoin, which is highly volatile and can become illiquid at any time. The fund seeks to track the performance of bitcoin, as measured by the Fidelity Bitcoin Reference Rate, and holds 100% bitcoin. The net asset value of the fund generally reflects the price changes of spot bitcoin, though there may be discrepancies due to fees and rebalancing costs and delays.

FBTC can be purchased through multiple account types, including brokerage, trust, and tax-advantaged accounts. It offers a familiar investment structure, standard reporting, and transparent pricing, making it easy for advisors to incorporate it into client portfolios. With competitive pricing, intraday liquidity, and no lockups, FBTC can be an attractive investment option.

It is important to note that the performance of FBTC will not reflect the exact return an investor would realize if they purchased bitcoin directly. Investors in the fund will not have the same rights as bitcoin holders and will not receive redemption proceeds in bitcoin. As with any investment, individuals should carefully consider their investment objectives, risk tolerance, and financial situation before investing in FBTC.

Fidelity® Ethereum Fund (FETH): Invest in ether without buying it directly

Fidelity does allow crypto investments. The company has been an innovator in crypto since 2014, when it began mining bitcoin. In 2018, it launched its first crypto service: Fidelity Digital Assets, an institutional custody and trading platform for digital assets.

Fidelity now has two crypto funds—one for bitcoin, one for ether—so you can add exposure to crypto in brokerage, trust, and IRA accounts. The funds are called the Fidelity® Wise Origin® Bitcoin Fund (FBTC) and the Fidelity® Ethereum Fund (FETH).

The Fidelity® Ethereum Fund (FETH) is an exchange-traded product that seeks to track the performance of ether. FETH provides investors with the opportunity to gain exposure to the price of ether in a familiar investment structure that passively invests in ether. As an exchange-traded product, investors can purchase the fund through multiple account types, including brokerage, trust, and tax-advantaged accounts like an IRA.

Fidelity describes FETH as "an easier path to crypto investing". With FETH, you can invest in the price of ether with competitive expense ratios. You can use your existing Fidelity brokerage account, including an IRA, to invest.

Fidelity emphasises that FETH is for investors with a high-risk tolerance. FETH invests in a single asset, ether, which is highly volatile and can become illiquid at any time. Investors could lose their entire investment.

Fidelity also offers a range of other crypto investment opportunities, including buying crypto directly, buying crypto-related exchange-traded funds (ETFs), and buying cryptocurrency stocks.

Crypto ETPs: Gain exposure to a cryptocurrency's value without buying the coin

Crypto exchange-traded products (ETPs) are a way to gain exposure to a cryptocurrency's value without buying the coin. ETPs are financial instruments that track underlying securities, an index, or other financial products traded on exchanges. They can be purchased and sold throughout the trading day, like stocks.

ETPs give you direct exposure to a cryptocurrency's value without needing to buy the coin yourself. They can be bought through traditional routes like brokerage accounts, IRAs, and trusts, which may make tax and estate planning simpler compared to direct crypto purchases.

However, ETPs do not give you direct ownership of the cryptocurrency, and they can come with unique trading limitations and investment risks. For example, ETPs can only be traded during traditional market hours, meaning holders have to wait until the market opens to enter or exit any positions, even if crypto prices change significantly outside of trading hours.

Spot crypto ETPs are also a relatively new concept, and it remains to be seen whether they will achieve widespread adoption. If they don't, there could be liquidity issues, such as your buys being filled at higher prices than intended, and sells being filled at lower prices.

Fidelity offers the Fidelity Wise Origin Bitcoin Fund (FBTC) as a crypto ETP option.

Crypto-related ETFs: Gain exposure to a basket of cryptocurrencies or crypto stocks

Crypto-related ETFs are a good option for investors who want to gain exposure to the crypto market without directly purchasing and storing cryptocurrencies. These ETFs are traded on regular stock exchanges and can be held in standard brokerage accounts. Crypto-related ETFs can be divided into two main types:

Stock-based ETFs

Stock-based ETFs provide exposure to a basket of cryptocurrency stocks, i.e., the stocks of companies that operate in the crypto industry. For example, the Amplify Transformational Data Sharing ETF (BLOK) invests in companies involved in blockchain technology. This type of ETF offers diversification within the crypto space and is less risky than direct investments in cryptocurrencies.

Futures-based ETFs

Futures-based ETFs provide exposure to the futures of either a specific cryptocurrency or a basket of cryptocurrencies. For instance, the ProShares Bitcoin Strategy ETF (BITO) is a bitcoin futures ETF that started trading in October 2021. This type of ETF allows investors to speculate on the expected price of cryptocurrencies without directly owning the assets.

It is important to note that crypto-related ETFs have some disadvantages, including higher fees and the lack of direct ownership of cryptocurrencies. Additionally, crypto ETFs are subject to the volatility of the crypto market, and the regulatory environment for crypto is still evolving.

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