Cryptocurrency is a virtual currency secured through one-way cryptography. It appears on a distributed ledger called a blockchain that's transparent and shared among all users in a permanent and verifiable way that's nearly impossible to fake or hack into. The original intent of cryptocurrency was to allow online payments to be made directly from one party to another without the need for a central third-party intermediary like a bank. However, with the introduction of smart contracts, non-fungible tokens, stablecoins, and other innovations, additional uses and capabilities are rapidly evolving.
Cryptocurrency's value stems from a combination of scarcity and the perception that it is a store of value, an anonymous means of payment, or a hedge against inflation. Cryptocurrency investors can buy or sell them directly in a spot market, or they can invest indirectly in a futures market or by using investment products that provide cryptocurrency exposure.
For investors interested in cryptocurrency, Miller Moore has several choices for gaining exposure to cryptocurrency markets, though spot trading of cryptocurrency is not currently available.
Exchange-traded funds (ETFs) that provide exposure to companies that are focused on servicing the cryptocurrency market are available.
Our Miller Moore Crypto Thematic ETF is designed to deliver global exposure to companies that may benefit from the development or utilization of cryptocurrencies (including Bitcoin) and other digital assets, and the business activities connected to blockchain and other distributed ledger technology.
Third-party ETFs available at Miller Moore also invest in equities or futures contracts related to cryptocurrencies. You can find these funds in the Morningstar category "Digital Assets" using the Miller Moore ETF Fund Finder tool. You can also find these funds in the Morningstar categories "Trading-Miscellaneous" and “Miscellaneous Sector” using the MM ETF Fund Finder tool.
These products allow investors to trade shares in trusts holding large pools of a cryptocurrency, although these can involve high volatility, hefty fees, and other risks. They trade over-the-counter (OTC) and behave like closed-end funds.
Bitcoin futures contracts are agreements to buy or sell a specific quantity of Bitcoin at a specified price on a particular future date. Clients have a couple of ways to get exposure to them, depending on the Schwab account they have.
We suggest that clients who are interested in cryptocurrency approach them as speculative investments and consider their goals as well as the risks involved. For those who already have a diversified portfolio and a long-term investment plan, we see cryptocurrency as being used primarily for trading purposes outside the traditional portfolio.