A Beginner's Guide To Cryptocurrency Investment Via Etrade

Cryptocurrency is decentralised digital money that uses blockchain technology to make peer-to-peer payments. While E*TRADE does not offer direct cryptocurrency trading, it does provide ways to gain indirect exposure to popular cryptocurrencies via securities and futures. This means that investors can gain exposure to cryptocurrencies without directly owning and storing them. For example, E*TRADE offers crypto-focused ETFs and stocks, such as mining companies and trusts. These investment options allow investors to benefit from the performance of cryptocurrencies without actually buying or selling them. It's important to note that investing in cryptocurrency-related products carries a high level of risk and may not be suitable for all investors.

How to Invest in Cryptocurrency with E*TRADE

E*TRADE doesn't offer direct crypto buying

E*TRADE does not offer direct crypto buying. However, it does offer indirect exposure to popular cryptocurrencies via securities and futures. This means that you can invest in crypto-focused stocks and exchange-traded funds (ETFs).

For example, you can gain exposure to Bitcoin through the Grayscale Bitcoin Trust (GBTC) without directly purchasing it. Similarly, the Grayscale Ethereum Trust (ETHE) simplifies gaining exposure to Ethereum. These investment options are available for both Bitcoin and Ethereum.

ETFs are a type of security that tracks an index, sector, commodity, or other assets. Crypto ETFs allow investors to gain exposure to the crypto sector without buying the assets directly. When you invest in an ETF, you are buying a stake in a conglomerate that holds positions in the asset or group of assets. So, if you buy an ETF like BITO on E-Trade, your account balance will reflect any upward or downward movement by the token, as it tracks Bitcoin's performance.

Another option is to invest in the stocks of companies that are linked to blockchain or are focused on the crypto industry. For example, Riot Blockchain, Inc. (RIOT) focuses on large-scale and efficient mining operations, while Marathon Digital Holdings, Inc. (MARA) is committed to sustainable Bitcoin mining operations and scaling its mining capacity.

While E*TRADE does not offer direct crypto buying, these indirect investment options can provide a way to gain exposure to the cryptocurrency market and potentially benefit from its growth.

Invest in crypto-related funds and companies

E*TRADE does not currently offer direct crypto buying or trading. However, you can still invest in crypto-related funds and companies through the platform.

Crypto-Related Funds

Exchange-traded funds (ETFs) are a popular way to invest in cryptocurrencies. ETFs are professionally managed portfolios that include stocks, bonds, and other securities. Cryptocurrency ETFs invest in crypto futures contracts and attempt to track the price of one or more digital assets. Some well-known crypto ETFs include:

• ProShares Bitcoin Strategy ETF
• Valkyrie Bitcoin Strategy ETF
• Simplify U.S. Equity PLUS GBTC ETF
• Bitwise 10 Crypto Index Fund
• Global X Blockchain & Bitcoin Strategy ETF

Crypto-Related Companies

You can also invest in companies with a partial or total focus on cryptocurrency. These include cryptocurrency mining companies, mining hardware makers, and companies that support cryptocurrency, such as:

• Robinhood Markets Inc. (HOOD)
• PayPal Holdings Inc. (PYPL)
• MicroStrategy Inc. (MSTR)
• Riot Blockchain, Inc.
• Coinbase Global, Inc.

Use a regulated exchange like Kraken for direct crypto investments

If you're looking to invest directly in cryptocurrencies, you may want to consider using a regulated exchange like Kraken. While E*TRADE is a popular brokerage platform, it doesn't offer direct crypto buying or trading. Instead, it allows you to invest in crypto-focused funds or companies linked to blockchain technology.

Kraken, on the other hand, is a US-based cryptocurrency exchange founded in 2011. It is regulated and secure, making it ideal for investors who want to directly buy and sell cryptocurrencies. The platform offers over 185 cryptocurrencies, including popular options like Bitcoin and Litecoin. With a simple account setup process, you can connect your US bank account to Kraken and start investing in various cryptocurrencies.

One of the advantages of using Kraken is its low fees. Their trading fees start at 0.16%, which is lower than many other platforms. Additionally, they offer free USD deposits through ACH transfers, making it a cost-effective option for US investors entering the crypto market. Kraken also provides advanced features for more experienced traders, such as deep liquidity across markets and low-latency APIs for fast trading.

Kraken has a strong focus on security and regulatory compliance. It has been the subject of regulatory investigations and has worked to address any concerns raised by authorities. The platform is registered with FinCEN, ensuring secure transactions and easy USD transfers for its users. It's important to note that Kraken may have certain restrictions depending on your verified residency, so be sure to check their Terms of Service for eligibility criteria.

Overall, if you're an E*TRADE user looking to invest directly in cryptocurrencies, Kraken is a secure and cost-effective option. With its wide range of cryptocurrencies, low fees, and user-friendly platform, Kraken provides a compelling choice for those seeking direct exposure to the crypto market.

Crypto ETFs allow investors to gain exposure to the crypto sector without direct buying

Crypto ETFs, or cryptocurrency exchange-traded funds, allow investors to gain exposure to the crypto sector without directly buying. Crypto ETFs track the price performance of cryptocurrencies by investing in a portfolio linked to their instruments. They trade on regular stock exchanges, and investors can hold them in their standard brokerage accounts.

Crypto ETFs are an attractive option for investors who want to avoid the complex or time-intensive process of setting up a crypto wallet and using a crypto exchange. With a crypto ETF, investors can gain exposure to cryptocurrencies through their regular brokerage accounts, eliminating the need to directly purchase and store the tokens themselves.

The first crypto ETFs were launched in 2021, and they have since gained traction as an alternative to direct investment in cryptocurrencies. These funds typically track the performance of one or more cryptocurrencies, providing investors with a convenient way to diversify their portfolios and benefit from the potential growth of the crypto market.

While crypto ETFs offer a simpler and more accessible way to invest in cryptocurrencies, it's important to consider the potential drawbacks. Investing in a crypto ETF tends to be more expensive than buying cryptocurrency directly due to higher expense ratios and brokerage fees. Additionally, investors don't have direct ownership of the crypto assets, even if the ETF invests in them directly.

It's also important to note that the crypto market is highly volatile, and the regulatory landscape is still evolving. The lack of regulation in the crypto space has been a concern for the U.S. Securities and Exchange Commission (SEC), which has hesitated to approve crypto ETFs in the past. However, due to pressure from federal court rulings, the SEC approved the first spot crypto ETFs in early 2024.

Understand the risks of investing in cryptocurrency

Cryptocurrency is a high-risk investment. It is important to understand the risks before investing. Here are some of the key risks associated with investing in cryptocurrency:

Volatility

Cryptocurrencies are highly volatile due to their susceptibility to market sentiment, speculation, and manipulation. Unexpected changes in market sentiment can lead to sharp and sudden price moves. It is not uncommon for the value of cryptocurrencies to drop quickly and significantly. The unregulated and anonymous nature of digital asset markets contributes to price volatility, as crypto exchanges, media owners, and influential investors can manipulate prices.

Unregulated Market

Cryptocurrencies are currently unregulated by governments and central banks, which creates uncertainty for investors. The lack of regulatory frameworks means there is a high degree of uncertainty regarding price volatility and market manipulation. Additionally, investors are concerned about the possibility of future restrictions on cryptocurrencies, which may impact their value or even result in a ban.

Cyber-Security Risks

Cryptocurrency exchanges and trading platforms are vulnerable to hacking and other malicious activities. There is a constant threat of hacking if cryptocurrencies are not correctly stored and protected. Investors may not be able to recover assets that are lost or stolen, and mistaken transactions cannot be reversed. Cryptocurrencies also lack official safeguards or insurance, unlike traditional investments through banks or brokerages.

Peer-to-Peer Transaction Risks

Digital currencies can be traded on various online platforms, but many marketplaces provide little to no clearing or intermediary services and are unregulated. In such cases, all risks, such as double-selling, are borne by the transacting parties.

Loss of Private Key

Bitcoins and other cryptocurrencies are typically stored in a digital wallet and controlled by the holder of the public and private keys associated with the wallet. If the private key is lost, destroyed, or compromised, the investor may lose access to their digital assets. If a third party acquires the private key, they may gain unauthorized access to the investor's cryptocurrencies.

Taxation Uncertainty

There is a lack of clarity regarding the tax treatment of investments in digital currencies. The tax obligations and record-keeping requirements vary across jurisdictions, and investors may need specific tax advice to ensure compliance with the regulations in their home jurisdiction.

Frequently asked questions