Fidelity's Crypto Investment Plans: What You Need To Know

Fidelity Investments, one of the world's largest brokerages, offers its customers the opportunity to invest in cryptocurrency through its platform, Fidelity Crypto. This platform allows investors to trade in cryptocurrencies like Bitcoin and Ethereum. With no minimum deposit required and commission-free trading, Fidelity Crypto provides an easy entry point for those looking to explore the volatile world of crypto assets. However, the platform's limited offerings and functionality might not appeal to more experienced crypto enthusiasts.

Fidelity Crypto®: Fidelity's platform for retail investors to trade cryptocurrency

Fidelity Investments is launching a new account that will allow retail investors to trade crypto products commission-free. The platform, Fidelity Crypto®, is offered by Fidelity Digital Assets℠. While the platform hasn't officially launched yet, interested investors can sign up for the waiting list on Fidelity's website.

Fidelity Crypto® will allow investors to buy and sell cryptocurrencies, starting with as little as $1. The platform will initially support Bitcoin and Ethereum, with the potential for additional cryptocurrencies to be added in the future.

Fidelity Crypto® accounts are separate from other types of brokerage accounts managed by the company. To fund a Fidelity Crypto® account, users can transfer money from existing Fidelity accounts or set up new brokerage or cash management accounts. There is no minimum deposit required to open a crypto trading account, and the minimum crypto purchase is $1.

Fidelity Digital Assets will earn money by collecting a spread of no more than 1% on crypto trades, which is competitive compared to other crypto services. However, it is important to note that users cannot send or receive cryptocurrency from their accounts, and trading is limited to 23 hours a day, 7 days a week.

Fidelity Crypto® is designed for investors with a high risk tolerance as cryptocurrency is a highly volatile asset class. Investors could lose their entire investment, and crypto may be more susceptible to market manipulation than securities.

Fidelity has been an innovator in crypto since 2014, when it began mining bitcoin. The company is committed to unlocking new investment opportunities for its clients as crypto evolves. With its focus on education, Fidelity aims to help investors trade crypto with clarity and make informed decisions.

Fidelity's crypto fees: The company describes its crypto trading as commission-free, but it takes a spread of up to 1% on trades

Fidelity Investments, a company with approximately 40 million individual clients, introduced its crypto service in 2021. The company describes its crypto trading as "commission-free", but it does take a spread of up to 1% on trades. This means that while there is no direct fee for buying or selling cryptocurrencies like Bitcoin and Ethereum on Fidelity Crypto®, the price you pay includes a markup of up to 1%.

The spread is the difference between the price you pay and the price at which Fidelity Digital Assets℠, the company offering Fidelity Crypto®, buys or sells digital assets to fill your order. This spread was introduced on June 28, 2023, and is included in the execution price of the trade. So, if you placed a market order to buy $10 of Bitcoin, the 1% spread would be based on that $10 trade.

Fidelity's fees are relatively good compared to other crypto services. Coinbase, for example, often charges a fee of $2.99 on simple transactions, which would exceed 1% on small purchases. Other crypto services can have significantly higher fees, with some upward of 10% depending on the payment method.

It's important to note that while Fidelity Crypto® does not charge commissions or fees for buying or selling cryptocurrencies, there may be other costs associated with trading crypto on the platform, such as the spread. Additionally, Fidelity Crypto® is only available to US citizens residing in certain states.

Crypto functionality: Users can't send or receive cryptocurrency from their accounts, and trading is limited to 23 hours a day

Fidelity's crypto platform allows investors to trade Bitcoin and Ethereum, with a minimum account balance of $1. While the platform offers commission-free trading, it takes a spread of up to 1% on crypto trades. However, one of the limitations of the platform is that users cannot send or receive cryptocurrencies from their accounts. This restriction may deter users who want to use crypto for payments or access blockchain-based services.

The inability to transfer cryptocurrencies out of Fidelity accounts is a significant drawback for users who want to utilise their crypto holdings beyond simply holding them. It limits their ability to explore other opportunities in the crypto space, such as using their crypto on decentralised finance products or other blockchain-based services. This restriction may be a deal-breaker for experienced crypto enthusiasts who value the ability to move their assets freely.

The restriction on sending and receiving crypto may be due to regulatory compliance or risk management strategies. Some regulatory frameworks require strict monitoring and control over the flow of cryptocurrencies to prevent money laundering, fraud, or other illicit activities. Additionally, by limiting transfers, Fidelity may be trying to mitigate the risks associated with the volatile nature of crypto assets.

Furthermore, the trading hours for crypto on Fidelity's platform are limited to 23 hours a day, from 4 a.m. to 12 a.m. Eastern time. This restriction may be inconvenient for investors who prefer to trade around the clock or want to react immediately to market movements. The limited trading hours could be due to operational constraints or risk management strategies employed by Fidelity.

Overall, while Fidelity's crypto platform provides a simple entry point for investors new to crypto, the limitations on sending, receiving, and trading hours may be a drawback for more experienced crypto users who require greater flexibility and control over their assets. These restrictions highlight the need for investors to thoroughly understand the functionalities and limitations of any platform before committing their funds.

Crypto offerings: Fidelity currently only offers two cryptocurrencies: Bitcoin and Ethereum

Fidelity Investments, one of the world's largest brokerages, offers its customers the opportunity to trade in Bitcoin and Ethereum through its subsidiary, Fidelity Digital Assets. With approximately 40 million individual clients, the company's crypto service provides access to digital assets, starting with a minimum investment of $1.

The process of investing in cryptocurrencies through Fidelity is simplified, catering to investors who are curious about this asset class. However, for more experienced crypto enthusiasts, the limited offerings of only Bitcoin and Ethereum might be a drawback.

Fidelity Crypto accounts provide commission-free trading, although the company does take a spread of up to 1% on crypto trades. This is still relatively competitive compared to other crypto services, such as Coinbase, which often charges a fee of $2.99 per transaction.

While Fidelity's crypto offerings are currently limited, the company has stated that additional cryptocurrencies may be introduced in the future. This indicates a potential for expansion to cater to a wider range of investor needs and preferences.

Crypto risks: Crypto is a highly volatile asset class and investors could lose their entire investment

Crypto is a highly volatile asset class, and investors could lose their entire investment. Crypto prices can switch directions quickly, moving suddenly with no warning. While trends can change, there are many factors that contribute to price fluctuations.

People's faith and trust in a currency play a major role in its stability. Digital currencies are still in their infancy compared to fiat currencies like the US dollar, the Chinese yuan, or British pound. Many investors liken crypto to the early days of tech stocks. As more people accept its real-world use, opinions can shift. For example, the price of many cryptos is primarily driven by whether other people are buying it, and therefore a post from an influencer can have a huge impact on the price.

In these early stages, the price of crypto can be sensitive to influential figures and media coverage. Then, in a flash, crypto prices can plummet due to the uncertainties of government regulation or geopolitical strife. Additional factors affecting crypto prices are investor demand and coin supply. This relationship can lead to price fluctuations. Releasing new coins can also move prices.

The collapse of one of the largest crypto exchanges in the world, FTX, highlighted the volatile and unpredictable nature of crypto activity. It sent shockwaves throughout the crypto community and left over one million customers unable to withdraw their assets, which some estimated at up to $8 billion. The downfall of FTX has made many investors think twice about engaging in crypto activity, causing repercussions within the industry.

Most crypto-related activities are not regulated. It's true that crypto businesses operating in the UK have to register and follow anti-money laundering rules and new marketing regulations. However, once your money is in the crypto ecosystem, there are no rules to protect it, unlike other investments. So, if you make any crypto-related investments, you're unlikely to have access to the Financial Services Compensation Scheme (FSCS) or the Financial Ombudsman Service (FOS) if something goes wrong.

As with other kinds of high-risk investments, anybody thinking about buying crypto assets needs to fully understand all the risks, as well as the opportunities involved. It is important not to throw everything you have into one investment opportunity.

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