Cryptocurrency has taken the financial world by storm, becoming an investment option for many people seeking to diversify their portfolios. However, as with any new asset class, navigating the world of crypto can seem daunting.
Whether you are a seasoned investor or a complete beginner, using a trusted platform like Fidelity can help simplify the process of investing in crypto. In this guide, we will explore how to invest in crypto with Fidelity, covering everything you need to know from setting up your account to making your first trade.
What Is Fidelity and Why Should You Consider It for Crypto?
Fidelity is a financial services giant known for its extensive offerings, including retirement planning, stock trading, and investment management. Over the years, Fidelity has made a name for itself as a reliable platform for traditional investments. However, it has also entered the world of cryptocurrency by offering secure and regulated crypto services to its customers.
By investing in crypto with Fidelity, you can take advantage of the platform’s robust security features, easy-to-use interface, and its strong reputation within the financial industry. Fidelity offers cryptocurrency services through Fidelity Digital Assets, a subsidiary that provides institutional-grade services to investors, including custody and trade execution for Bitcoin and Ethereum.
The Basics of Cryptocurrency
Before diving into the specifics of how to invest in crypto with Fidelity, it is important to understand what cryptocurrency is and why it is so popular among investors. Cryptocurrencies like Bitcoin and Ethereum are decentralized digital currencies that operate on blockchain technology. Unlike traditional fiat currencies, cryptocurrencies are not issued or regulated by a central authority, making them attractive to those seeking alternative investments.
Blockchain technology enables secure, transparent transactions without the need for intermediaries like banks. This has led to cryptocurrencies being used for a wide range of purposes, from peer-to-peer transactions to decentralized finance (DeFi) applications.
Benefits of Investing in Crypto
Investing in cryptocurrency offers several potential benefits, including:
- High Returns: Cryptocurrencies have demonstrated the potential for high returns over the past decade. Bitcoin, for example, has experienced substantial growth, with some early investors seeing returns of over 1,000%.
- Diversification: Adding crypto to your investment portfolio can help diversify your assets. Because cryptocurrencies often move independently of traditional assets like stocks and bonds, they can provide a hedge against market volatility.
- Decentralization: Cryptocurrencies operate outside the control of central banks and governments. For many investors, this provides a sense of freedom and autonomy.
- Innovation: The blockchain and cryptocurrency space is constantly evolving, providing opportunities for investors to get in early on groundbreaking technologies.
Getting Started: How to Invest in Crypto with Fidelity
Investing in crypto with Fidelity is a straightforward process, and with the right preparation, you can get started quickly. Here’s a step-by-step guide to help you navigate the process:
1. Create a Fidelity Account
The first step in investing in crypto with Fidelity is to create a Fidelity account if you don’t already have one. Visit the Fidelity website and click on “Open an Account.” You’ll need to provide some personal information, including your name, address, and Social Security number.
Once you’ve created your account, you’ll need to link a bank account to fund your Fidelity account. This is where you’ll deposit the money you plan to use to purchase cryptocurrencies.
2. Set Up Your Cryptocurrency Account
Fidelity offers a specific platform for crypto transactions, known as Fidelity Digital Assets. This platform allows you to buy, sell, and store cryptocurrencies securely. To start using it, you’ll need to apply for access to the service, which is available to individual investors who meet certain criteria.
While Fidelity Digital Assets is primarily aimed at institutional investors, the platform’s services are expanding to retail investors. Once you’ve been approved, you’ll be able to access the crypto trading feature and begin making transactions.
3. Deposit Funds into Your Fidelity Account
After your account is set up, the next step is to deposit funds into your Fidelity account. You can transfer funds from your linked bank account, or you can use an existing brokerage account to fund your investment.
Fidelity allows you to use cash or other assets in your account to purchase crypto. You’ll need to ensure that you have sufficient funds available in your account to complete the transaction.
4. Choose the Cryptocurrencies You Want to Invest In
Fidelity currently offers two of the most popular cryptocurrencies for purchase: Bitcoin (BTC) and Ethereum (ETH). These two digital currencies have been around for a while and have established themselves as the most widely accepted and recognized cryptocurrencies.
When deciding which crypto to invest in, it’s essential to conduct thorough research. Both Bitcoin and Ethereum have different use cases and potential for growth. Bitcoin is widely seen as a store of value, while Ethereum powers a vast network of decentralized applications (dApps) and smart contracts.
5. Make Your First Crypto Purchase
Once you’ve chosen your cryptocurrencies, it’s time to make your first purchase. Fidelity’s user interface makes this process easy, allowing you to buy crypto with just a few clicks. Simply enter the amount you want to invest and place your order.
Fidelity supports both market and limit orders, which gives you flexibility in how you execute your trades. A market order will execute immediately at the current market price, while a limit order will execute when the price reaches your specified limit.
6. Secure Your Crypto
After purchasing your cryptocurrency, it’s essential to store it securely. Fidelity provides a secure storage solution for your digital assets, ensuring that your private keys are kept safe.
If you plan to hold crypto for the long term, consider using a hardware wallet, which is an offline storage solution that protects your crypto from hacking and theft. Fidelity allows you to transfer your crypto holdings to a private wallet if you prefer to manage your own security.
Understanding Fees and Taxes When Investing in Crypto with Fidelity
When investing in crypto with Fidelity, it’s important to understand the associated fees and tax implications. Fidelity charges a fee for buying and selling crypto, which can vary depending on the size of your transaction and the specific crypto asset you are purchasing.
Additionally, like other investments, cryptocurrencies are subject to taxes. The IRS treats crypto as property, meaning that capital gains tax applies when you sell or exchange your holdings. Be sure to keep track of your transactions for tax purposes and consult with a tax professional if necessary.
Managing Risk When Investing in Crypto
Cryptocurrency is a volatile asset class, and it’s essential to manage your risk when investing. Here are some strategies to help you minimize risk while investing in crypto:
- Start Small: If you are new to crypto, consider starting with a small investment until you gain a better understanding of the market.
- Diversify: Don’t put all your funds into one cryptocurrency. Diversifying your investments can help reduce risk and smooth out potential losses.
- Set a Budget: Decide how much you are willing to invest in crypto and stick to it. Avoid investing more than you can afford to lose.
- Stay Informed: Stay updated on the latest developments in the crypto space. Crypto markets are highly sensitive to news and regulatory changes, so keeping yourself informed can help you make better decisions.
- Use Stop-Loss Orders: A stop-loss order allows you to set a predetermined price at which your crypto will be sold automatically if the price drops below that point. This can help you limit your losses in volatile markets.
The Future of Crypto with Fidelity
Fidelity has positioned itself as a leader in the world of crypto, offering a secure and regulated platform for investors. As the crypto market continues to mature, Fidelity’s services are likely to expand, providing even more opportunities for individual investors.
While cryptocurrency remains a relatively new and volatile asset class, platforms like Fidelity make it easier for everyday investors to gain exposure to this exciting market. Whether you’re looking to invest in Bitcoin, Ethereum, or other digital currencies, Fidelity provides the tools and resources to help you get started.
Conclusion
Investing in crypto with Fidelity offers an accessible and secure way to participate in the growing cryptocurrency market. By following the steps outlined in this guide, you can set up an account, make your first purchase, and begin building your crypto portfolio with confidence. As always, it’s crucial to do your research and carefully consider your investment strategy to manage risk effectively. With Fidelity’s trusted platform and comprehensive services, you can take your first step into the world of crypto with ease.
If you’re ready to start your crypto investment journey, Fidelity provides all the tools you need to succeed. Take your time, stay informed, and explore the possibilities of crypto today.