Wealthfront, a digital advisor with more than $25 billion in assets under management, has added two Grayscale cryptocurrency trusts to its investment portfolio: the Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust (ETHE).
According to the blog post announcing the Grayscale additions, investors will be limited to a 10% total allocation to the trusts, whether invested in one or both, due to investment risks and because Wealthfront is a fiduciary obligated to operate in the best interests of investors.
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,” according to the digital advisor’s website.
Wealthfront’s latest service, according to its blog, makes it easier for clients to invest in cryptocurrencies, which “may feel frightening… It takes time and effort to investigate all of the possibilities, set up a wallet, and keep track of a second account… We’ve made it simple to include Bitcoin and Ethereum in your Wealthfront portfolio, with no need for additional wallets.”
Grayscale investments are unit investment trusts (UITs), which are comparable to exchange-traded funds (ETFs) in that they hold a variety of assets. They, unlike ETFs, do not trade on stock exchanges and, as a result, may have higher trading expenses.
The trusts, like some of the Ark Investment Management ETFs available on the Wealthfront platform, provide indirect exposure to the bitcoin market. ARK ETFs own Coinbase, an online marketplace for buying, selling, transferring, and storing digital currency; Tesla and Square, which invest in Bitcoin; and at least one ARK ETF, the Ark Next Generation Internet ETF (ARKW), which owns the Grayscale Bitcoin Trust.
According to Wealthfront’s newest blog, the company added more ETFs to its platform earlier this year, including more socially responsible options, and it hopes to add “specially crafted” SRI portfolios soon.