Blog Misc How to Invest in Cryptocurrency ETF For Beginner

How to Invest in Cryptocurrency ETF For Beginner

date June 24, 2022 time 6 min read 181 views

The volatility of the cryptocurrency market such as Bitcoin (BTC), and Ethereum (ETH) has caused a great loss to the investors, especially the beginners. That is the reason why people are looking for a lower risk and stable type of blockchain investment. Exchange-traded funds (ETFs) are not an exception when being suitable for beginner investors due to their cheap, diversified and lower risk than individual stocks. Here are some basic things to know about an ETF as well as a step-by-step guide on how to invest in a cryptocurrency ETF for the beginner.  

What are Cryptocurrency ETF

Before going into how to invest in cryptocurrency ETFs, we should glance through the definition of cryptocurrency in general, and the cryptocurrency ETF in specific. This is because a cryptocurrency ETF has been offered to many people involved in the game for lower risks instead of going individually. 

  • Cryptocurrency 

A cryptocurrency is broadly defined as a digital token or coin that appears on a distributed platform called a blockchain. Normally, when mentioning cryptocurrency, people will mostly think about Bitcoin. But in fact, there are over 18,000 crypto money existing on the blockchain platform with some well-known digital currencies such as Ethereum (ETH), Polkadot (DOT), and Binance Coin (BNB). 

  • Cryptocurrency ETF

The ETF stands for Exchange-Trade Fund, is a type of investment fund which allows investors to buy many stocks or bonds at once on blockchain platforms. Based on the sales and purchasing activities, the share price of cryptocurrency ETF fluctuates every day. 

A cryptocurrency ETF is a fund consisting of many sorts of cryptocurrencies. Source: flickr.com

Cryptocurrency has captured the attention of a variety of investors such as retailers, companies, and institutions. Besides having the potential gains, a big investment loss is still. The instability of BTC and ETH in the first few months of 2022 has caused a great loss to the investors. As a result, investors would not try to pick the current crypto itself, they shift to choose an ETF which can yield lots of investment into a basket of crypto. 

How to Invest in Cryptocurrency ETF

Step 1: Research and choose your brokers/ trading platform based on your purposes

Before investing in a cryptocurrency ETF, investors should take time to choose their own reliable brokers and their investment focus. Here are some of the best cryptocurrency ETF online brokers investing in 2022 for beginners, and especially most of them are $0 commission trading platforms are: 

  • Charles Schwab (Rate 5/5): is specialized in individual investors. This platform also offers free stock trade while using Schwab. Besides, it also provides some educational resources namely Schwab Live Daily for everyday trading trends (from Reuters, Briefing.com, and Morning Stars), and the ETF Select list for the real-time analysis tool from the experts. 
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Charles Schwab – a cryptocurrency ETF provider. Source: Charles Schwab
  • Fidelity Investments (Rate 5/5): is considered to be the best cryptocurrency ETF when offering free research and screening tools to narrow down the suitable ETF options based on your criteria such as company size, fund size, budget, expense ratio etc. Furthermore, you can track your account balance, make trades etc on your application. It has a high rate because the brokers charge no fees including activity fees as well as transfer out one. 
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Fidelity Investments- a cryptocurrency ETF provider. Source: Fidelity Investment 
  • Vanguard Group (Rate 3.5/5): now manages trillions in global assets. Vanguard is famous as a low-cost fund provider when it has low management fees with a ratio of 0.03% per, and $20 when trading from other fund companies. Additionally, Vanguard has offered different screening tools than others on comparing the ability of an ETF based on customers’ references; and given a financial plan right after you choose your own funds. 
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Vanguard Group- a cryptocurrency ETF provider. Source: Vanguard Group

E-trade Financial (Rate 4.5/5): has provided the special service in pre-build your ETF portfolio with strategies relying on the level of stock, bonds, and cash you have. E-trade also let you trade a few ETFs for 24 hours so you can have liquidity even when the markets are closed.

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E*trade Finance – a cryptocurrency ETF provider. Source: E*Trade Finance 

Merrill Edge (Rate 4/5): integrates with Bank of America for customer rewards. It is open to recommending the ETFs from other platforms (íShare and Vanguard funds), but you are offered a free purchase for any ETFs available on Merrill’s platform. However, you will be charged a $49.95 fee for a full transfer to another broker. Overall, the layout and performance of Merrill Edge are estimated to be easy to digest including top holding, performance, rating and key statistics.

Merrill Edge- a cryptocurrency ETF provider. Source: Merrill Edge

Step 2: Open the Brokerage Account

First of all, you should sign up for an online account through the brokers or trading platforms just like the way you opened the bank account before putting money and physically investing. Be prepared with your personal information, social security and bank account numbers when registering. 

Notwithstanding, if you have money but rather have somebody do the investing job for you, you might be keen on opening a Robo-advisor account. This account would represent yourself to build and manage your investment portfolio

Step 3: Research and Choose your reliable ETFs 

After choosing the best cryptocurrency ETF for yourself, It is high time for you to spend time researching and choosing the best cryptocurrency ETF by using a screening tool to filter based on your preferences and criteria such as asset type, industry, and trading performance and funding activities. Nowadays, most brokers have offered more than a screening tool for investors to research and learn.   Besides that, cryptocurrency ETF’ experts also advise investors to narrow down their ETF choices on administrative expenses, commissions, volume, holdings, performance, and trading price. 

How much money is able to invest in an ETF?

In fact, ETFs do not have the minimum investment requirements. Nevertheless, investors must base on the broker offering the ability to buy the fractional shares of stock. 

Besides having the $0 (free) commission, one should note that an ETF has different tax implications. It requires investors to pay capital gain taxes on any profit. The profit on ETFs sold at a gain is taxed the same as the regulation in both stock and bonds. 

  • Gain from the sales of those funds are taxed like the bond ETF: up to 23.8% for long-term rate and 40.8% for short-term rate 
  • Gain from the selling of funds are taxed like ordinary income: up to 40.8% rate

As predicted, ETF seems to be positive for long-term investment. However, do not put all eggs in one basket, so that you can invest and trade in various tokens such as Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Binance Coin (BNB).  

Start investing with MyConstant

If you catch the trend of the digital world, MyConstant’s P2P lending could be a great platform for you to monetize.

This platform offers you 3 powerful tools that you can consider to earn:

  • Crypto loan. This option allows you to earn up to 7% APR by lending to cryptocurrency holders around the world. The term (1,3, or 6 months) is at your disposal.
  • Besides, you can invest your idle coins and earn interest on crypto up to 15% APY compounded and paid out every second through our Crypto-Lend feature. This can apply when you own some cryptos and haven’t planned to buy more yet.
  • Instant-access investment. When you deposit money into a MyConstant account online, an investment pool will be lent to you. You can earn 4% APY and make free withdrawals at any time without minimum investment.

Sounds interesting? Sign up for a free account today and start investing.

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