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Wealthfront Adds 2 Grayscale Cryptocurrency Trusts to Its Platform

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What You Need to Know

  • They are the Grayscale Bitcoin and Ethereum trusts.
  • Investors can't allocate more than 10% of assets to the trusts due to investment risks and Grayscale's fiduciary role.
  • Wealthfront plans to add “specially curated” SRI portfolios soon, according to a blog post.

Wealthfront, the digital advisor with over $25 billion in assets, has added two Grayscale cryptocurrency trusts to its menu of investments — the Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust (ETHE).

Investors will be limited to a 10% total allocation to the trusts whether invested in one or both, because of their investment risks and because Wealthfront is a fiduciary required to act in the best interests of investors, according to the blog post announcing the Grayscale additions.

The digital advisor explains on its website that cryptocurrencies are “significantly more volatile than most securities-based ETFs, the trusts can trade at prices that differ significantly from their net asset value (NAV) because they lack an efficient creation and redemption mechanism and are more susceptible to hacking than many other investments.”

In its blog, Wealthfront notes that its latest offering makes it easier for clients to invest in cryptocurrencies, which “can feel intimidating … [and] takes time and effort to research all of the options, set up a wallet, and monitor an additional account … We’ve made it easy to get exposure to Bitcoin and Ethereum right in your Wealthfront portfolio, no wallets required.”

The Grayscale investments are unit investment trusts (UITs), which are similar to ETFs in that they include multiple assets. Unlike ETFs, however, they don’t trade on stock exchanges and may have higher trading costs as a result.

The trusts provide indirect exposure to the cryptocurrency market, as do some of the Ark Investment Management ETFs offered on the Wealthfront platform. Several ARK ETFs own Coinbase, an online platform for buying, selling, transferring and storing digital currency; Tesla and Square, which invest in Bitcoin; and at least one — the Ark Next Generation Internet ETF (ARKW) — owns the Grayscale Bitcoin Trust.

Earlier this year, Wealthfront added more ETFs to its platform, including more socially responsible options, and it expects to add “specially curated” SRI portfolios soon, according to its latest blog.