TL;DR– Buy Grayscale trusts, the Bitwise Crypto Index, or the Bitcoin ETF (BITO). You can only invest in larger cap coins right now on Schwab like Bitcoin and Ethereum. Jump below for a step-by-step.
With Bitcoin outperforming nearly every asset class over the past decade, it’s no wonder that at least 49% of American financial advisers report that their clients want to get in on the action. Two big things are holding the crypto asset class back- the first being that the general public cannot understand what it is, and the second is that purchasing crypto isn’t quite as easy as buying stocks- but that’s changing. In the early days of the internet, most of the public didn’t know how that worked, either- and now the internet has more or less produced a swath of $2 trillion companies (Apple, Amazon, Google, Facebook, Microsoft). The passage wasn’t a smooth ride though, with mass speculation during the Dotcom boom and bust of the early 2000s. In this article we’ll discuss how to use Charles Schwab, America’s largest brokerage, to buy and sell cryptocurrency assets.
A note about investing in crypto through brokerages
If you don’t know it already, it’s important you know that cryptocurrencies are not stocks. A key ownership difference between cryptos and stocks is that traditionally when you own cryptos, you have to have storage of your own private keys (think of it as a private bank account number).
In the crypto space this is called “custody”. When you invest in cryptocurrencies through brokerages like Schwab, whoever offers the crypto trust will keep your private keys for you. You cannot directly purchase actual cryptos on Schwab.
This is similar to investing in gold and the broker holding the physical gold assets in storage. Essentially what you have when you buy crypto through a trust or an exchange is an “I owe you” from that entity. For this reason, I always recommend actually owning your own private keys with a hardware wallet. But if you’re investing through a brokerage like Schwab, this won’t be possible or necessary.
How to invest in cryptocurrency on Charles Schwab
To invest in crypto through Schwab, you can purchase shares of Grayscale Trusts for singular crypto assets or entities whose price runs parallel to crypto prices like (insert digital asset blah blah). Charles Schwab currently offers the following:
- Grayscale Bitcoin Trust (GBTC): invest in a trust that holds Bitcoin in custody
- Grayscale Ethereum Trust (ETHE): invest in a trust that holds Ethereum in custody
- Grayscale Litecoin Trust (LTCN): invest in a trust that holds Litecoin in custody
- Grayscale Digital Ordinary (GDLC): invest in a blend of mainly Bitcoin and Ethereum
- Grayscale Bitcoin Cash (BCHG): invest in a trust that holds Bitcoin Cash in custody
- Bitwise Crypto 10 Index (BITW): invest in a trust that holds the top 10 cryptocurrencies
- Bitwise Crypto Industry Innovation (BITQ): invest in companies that invest in blockchain technology
Steps for investing in crypto on Schwab
- Open a Charles Schwab brokerage or retirement account. You can go to this Schwab page to do this- it’s fast & easy.
- Log in to your Schwab account and on the top menu select Trade.
- If you have more than one Schwab account (i.e. one brokerage and one retirement account), make sure you have the correct account selected that you would like to invest in cryptocurrency for.
- Enter one of the ticker symbols listed above into the Symbol box. Under the Action menu, select Buy. Under the Order Type, select Market Order if you want the trade to execute immediately or select Limit and set a limit price if there’s a certain price you don’t want to go past. The total amount of shares purchased in dollars will appear on the right side of the page. Select Review Order.
- On the next page (the Verify Order page), make sure all of the information of trade looks correct, then select Place Order.
- The Schwab UI will then bring you to the Order Received page. Note that although cryptocurrency itself has no trading hours the issues listed in this article only trade when markets are open in the US- which (unless it’s a holiday) are Monday through Friday from 9:30am to 4:00pm US Eastern time. If you place a trade during off-hours you’ll have to wait until the market opens for the trades to execute, which will usually happen in the first five minutes. That’s it!
Among financial advisers that do recommend cryptocurrency exposure to their clients, most recommend only a 1-2% exposure position. If you’re reading this and you are or are going to invest in cryptocurrency, know that you are still extremely early to the space. Currently less than 2% of the world’s 8 billion people hold or transact in cryptocurrency, so there’s bound to be some big volatility since the asset class is so small and subject to market manipulation. If you’re a prudent investor, cryptocurrency probably isn’t going to be your deal. What gives me incentive to power through the market FUD and uncertainty due to lack of regulation is my belief that the technology truly has the ability to change the world by making Web 3.0 (the decentralized internet) a reality.
Keep calm and HODL on
Early in my days of investing in cryptocurrency, I had myself convinced that the day trading I was doing was ‘investing’ and not gambling- it quickly turned out to be the latter. I was chasing those dopamine hits- the quick highs I would get when one of the smaller shitcoins I owned would pump. I knew if I were to continue with my ways, I would get wrecked. My strategy now is to buy and hold- one of Warren Buffett and Charlie Munger’s quips in their letter to shareholders is that “their favorite holding period for investments is forever.” HODLing my coins and occasionally taking profits on the way up has brought me a lot more peace and better returns.