{"id":14218,"date":"2021-08-19T15:37:40","date_gmt":"2021-08-19T22:37:40","guid":{"rendered":"https:\/\/canary.kcprod.info/blog\/?p=14218"},"modified":"2024-09-06T10:48:14","modified_gmt":"2024-09-06T17:48:14","slug":"investing-in-cryptocurrency","status":"publish","type":"post","link":"https:\/\/canary.kcprod.info/blog\/investing-in-cryptocurrency\/","title":{"rendered":"Our Thoughts on Investing in Cryptocurrency"},"content":{"rendered":"\n

Note: As of March 21, 2024, Wealthfront uses the iShares Bitcoin Trust (IBIT) to represent the Bitcoin asset class instead of the Grayscale Bitcoin Trust (GBTC). As of September 9, 2024, Wealthfront uses the iShares Ethereum Trust (ETHA) to represent the Ethereum asset class instead of the Grayscale Ethereum Trust (ETHE). Read more here<\/a>. \t\t<\/em><\/p>\n\n\n\n

Earlier this summer, we began supporting cryptocurrency exposure<\/a> in Wealthfront portfolios. We\u2019re very excited about this, and we\u2019re proud to offer clients so many choices in building their ideal portfolio. We also take seriously our role as a fiduciary<\/a>, and we want to offer some guidance to anyone who is considering investing in cryptocurrency \u2014 either at Wealthfront or elsewhere.<\/p>\n\n\n\n

One of the most important things to understand about cryptocurrency as an investment is that it\u2019s highly volatile \u2014 this means it can either gain or lose a significant amount of value in a short period of time. For example, Bitcoin<\/a>, the largest digital currency by market capitalization, has a price history marked by large rallies and crashes, and in the last 12 months it has traded as high as $64,863.10 and as low as $9,916.49. On May 19, over the course of a single day, Bitcoin\u2019s value fell 30%<\/a>. It\u2019s true that many people have profited handsomely from investing in digital currencies, but it\u2019s not for the faint of heart. <\/p>\n\n\n\n

Because of this volatility, we consider investments in cryptocurrency risky. This includes the Grayscale statutory trusts GBTC<\/a> and ETHE<\/a>, which we offer on our platform. These trusts allow investors to get exposure to cryptocurrency without owning coins directly, but introduce another variable: potential tracking error which can cause the price of a share of the trust to differ from the value of the underlying asset.<\/p>\n\n\n\n

We don\u2019t say all of this to scare you away from investing in cryptocurrency. We\u2019re proponents of financial innovation and believers in the power of software \u2014 and as a result, we\u2019re excited about digital currencies. We know many of our clients are equally excited, so we want to give you a framework for thinking about these investments. Our advice is this: if you\u2019re going to invest in cryptocurrency, we think you should have an investment thesis.<\/strong> <\/p>\n\n\n\n

An investment thesis<\/a> is a logical argument for why an investment will increase in value over time. Often, an investment thesis will evaluate an investment\u2019s cash flow, but that isn\u2019t possible in the case of cryptocurrency. Instead, a successful investment thesis for cryptocurrency should draw on research and analysis of its characteristics and future economic events. For example, Fidelity\u2019s investment thesis for Bitcoin<\/a> references the asset\u2019s fixed supply and a number of factors that could drive an increase in Bitcoin demand including deglobalization and the transfer of wealth to millennials. Whether or not you agree with these specific reasons for investing in cryptocurrency, this is the kind of logic we encourage you to use.<\/p>\n\n\n\n

Unfortunately, some of the most common reasons for wanting to invest in cryptocurrency don\u2019t make great investment theses. Many people want to invest in cryptocurrency because it has performed well in the past \u2014 but this doesn\u2019t necessarily mean it will continue to do so in the future. Some people might also feel pressure to invest in cryptocurrency because it seems like everyone else is doing it, but FOMO doesn\u2019t make a good investment thesis, either.<\/p>\n\n\n\n

We\u2019re delighted to be the first investing service to allow clients to get exposure to cryptocurrency in a diversified and automated portfolio with features like tax-sensitive rebalancing and our industry-leading Tax-Loss Harvesting<\/a>. We hope this advice helps you navigate the question of how to invest in cryptocurrency so you can confidently build wealth on your own terms. <\/p>\n","protected":false},"excerpt":{"rendered":"

Note: As of March 21, 2024, Wealthfront uses the iShares Bitcoin Trust (IBIT) to represent the Bitcoin asset class instead of the Grayscale Bitcoin Trust (GBTC). As of September 9, 2024, Wealthfront uses the iShares Ethereum Trust (ETHA) to represent the Ethereum asset class instead of the Grayscale Ethereum Trust (ETHE). Read more here. Earlier […]<\/p>\n","protected":false},"author":129,"featured_media":14221,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1282],"tags":[1512],"coauthors":[82],"class_list":["post-14218","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-cryptocurrency"],"acf":[],"yoast_head":"\nOur Thoughts on Investing in Cryptocurrency | Wealthfront<\/title>\n<meta name=\"description\" content=\"Our advice is this: if you\u2019re going to invest in cryptocurrency, we think you should have an investment thesis.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/canary.kcprod.info/blog\/investing-in-cryptocurrency\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta 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