Schwab officially jumps into crypto and warns about it

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Schwab officially jumps into crypto and warns about it

This week, Charles Schwab warned clients against crypto scams posing as “too good to be true” investments. The company also launched its first crypto investment fund.

why is it important: Despite continued crypto warnings, traditional financial services firms on Wall Street continue to enter.

What is happening: Schwab asset management, a unit of Charles Schwab, spear the Schwab Crypto Thematic exchange-traded fund today, an idea first floated in April 2021.

Quick setting: The timing of Schwab’s warning and the launch of its fund could be read as a message that the only safe and effective way to invest in crypto is through an investment fund from a trusted source.

  • Our thought bubble: No.

Details: The crypto warning email reviewed by Axios reads like any innocuous “beware of risk” disclaimer trading platform often sent to their clients – which makes sense considering increase in reported cryptocurrency losses due to fraud.

  • “”Guaranteed” high investment returns”. It’s the most useful red flag. Good projects tout their ideas, not their gains. And no honest human being would make an investment guarantee without significant coverage.

Yes, but: The rest of the warnings listed by Schwab could globally apply to the vast majority of digital assets, without careful reading.

  • “Unlicensed or Unregistered Sellers.” Many crypto project founders aren’t on investor.gov, but that doesn’t mean they aren’t up to something good.
  • “Soaring Account Values.” It depends on what you call skyrocketing. The price of bitcoin, for example, surged from around $11,000 in August 2019 to an all-time high of nearly $70,000 in November 2021. That’s a gain of 536%.
  • False testimonials and false contacts. Well, if you know they’re fake…

Yes, but: The world of cryptos is risky, and there are a lot of bad and fake projects out there. Before straying from regulated investment vehicles, it makes sense to thoroughly research any given project.

  • Are there credible third parties talking about it on social media? Are the people featured on the website real?

Be smart: If in doubt, maybe start with well-established crypto projects and branch out cautiously.

big picture: The Schwab Crypto thematic ETF is accessible, tradable and safe as long as the investment comes from companies like Schwab, a company that has been around for since the 1970s.

  • But this ETF, alongside all the other ETFs available to regular US investors, does not provide a direct bet on crypto. They hold stocks or futures that provide indirect exposure.

Between the lines: The index tracked by the ETF Schwab includes stocks such as the largest crypto exchange in the United States, Coinbase Global, the crypto bank Silvergate Capital, MicroStrategy, which is a software company but holds a lot of bitcoins on its balance sheet and Bakkt, a payment and rewards boutique that dabbles in crypto.

  • It also includes mining companies.

To note : The fund looks a lot like iShares Blockchain and Tech ETF from BlackRock Where Fidelity Crypto & Digital Payments Industry ETFswho also track the indices that hold some of these stocks.

  • There is also the Invesco Algerian Galaxy Crypto Economy ETF. It holds some of these names, but 12% of the fund is in Grayscale’s Bitcoin Investment Trust. The latter is a kind of full-fledged fund, the details of which we wrote before.

The bottom line: Schwab has entered the world of crypto.

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