Fidelity launches commission-free crypto trades

by Arthur · November 3, 2022

While crypto markets have cratered this year, with some coins down more than 50% from their all-time highs at the end of 2021, Fidelity Investments launched two major initiatives that suggest the financial giant doesn’t think the currency is just a fad.

First, Fidelity announced that it is launching a new account that will allow retail investors to trade crypto products commission-free.

The platform, Fidelity Crypto, has not officially launched yet and the brokerage has not announced an official release date yet. But when it does, users will be able to buy, sell and hedge Bitcoin and Ethereum, as long as they maintain an account balance of at least $1. From Thursday, interested investors can sign up for a waiting list on Fidelity’s website.

The accounts are separate from other types of brokerage accounts managed by the company.

Fidelity is one of the world’s largest brokerages, managing $9.9 trillion in assets. The company says that additional cryptocurrencies may be added as trading options in the future.

While the company does not charge a commission, Fidelity Digital Assets will make money by collecting a spread of no more than 1%, based on the difference between the price investors buy or sell crypto and the price at which it fills the order.

Fidelity follows Robinhood and Binance.US, which already offer commission-free crypto trading. Crypto exchanges follow other markets in the battle for the lowest fees: Online brokerages including Fidelity, Charles Schwab and, of course, Robinhood, now offer zero-commission trading for US stocks.

Of course, the timing could have been better. The crypto market has plunged in value this year, and trading volumes have also dropped significantly.

Fidelity allows some investors to add Bitcoin to their 401(k)s

The crypto trade news comes as the firm also begins allowing some 401(k) plans it manages to invest in Bitcoin and other cryptocurrencies, which Fidelity first announced in April.

The US Department of Labor warned against the practice, saying it “has serious concerns about the plan’s decisions to expose participants to direct investments in cryptocurrencies or related products, such as NFTs, coins and cryptoassets.”

Newer investments like crypto tend to attract more inexperienced investors “with expectations of high returns and little understanding of the risks the investments pose.”

Investors should be careful – both about investing in crypto in a retirement account and trading crypto in general. It is more volatile than a common stock – as recent market swings show – and financial advisers say long-term investors should be careful how much they invest in it.

“I would keep it at a very low upper limit of 1% to 2% of assets at a maximum,” Catherine Valega, a certified financial planner in Boston, previously said Fortune. “These assets can be very volatile and I’m nervous that employers are setting themselves up for a big headache if investors get too excited and carried away.”