Introduction

Bitcoin has shifted from the fringes of finance and into the portfolios of major institutions and everyday investors. As crypto gains mainstream acceptance, traditional brokerages like Charles Schwab have begun offering ways to access this new asset class, though not always in the ways you might expect.

If you're a Schwab client wondering how to add Bitcoin exposure to your portfolio, you have several options available right now. While you can't directly buy Bitcoin through Schwab, there are multiple ways to invest in Bitcoin's price movements and the broader crypto ecosystem.

Schwab's Current Bitcoin Investment Approach

Charles Schwab doesn't currently support direct Bitcoin purchases. You won't find a "buy Bitcoin" button on their platform, and you can't transfer cryptocurrency in or out of your account. This approach reflects Schwab's cautious stance toward the evolving regulatory landscape surrounding digital assets.

However, Schwab has indicated they're monitoring the space closely and plan to offer spot crypto trading once regulatory clarity improves. Until then, they've developed a suite of Bitcoin-related investment products that provide exposure without requiring you to manage private keys or crypto wallets.

This indirect approach appeals to many traditional investors who want Bitcoin exposure but prefer the familiar regulatory framework and investor protections that come with established brokerage accounts.

Your Bitcoin Investment Options at Schwab

Spot Bitcoin ETFs

The most straightforward way to invest in Bitcoin through Schwab is via spot Bitcoin exchange-traded funds. These products, like the iShares Bitcoin Trust (IBIT), hold actual Bitcoin and track its price movements closely.

When you buy shares of a spot Bitcoin ETF, you're essentially buying a piece of a fund that owns Bitcoin. The fund handles all the technical aspects like custody, security, and storage, while you simply own shares that move up and down with Bitcoin's price.

These ETFs trade during regular market hours, settle in two business days like traditional securities, and don't require any special accounts or approvals. You can buy them in any Schwab brokerage account, including tax-advantaged retirement accounts.

Bitcoin Futures and Derivatives

For investors approved for futures trading, Schwab offers Bitcoin futures contracts and micro Bitcoin futures. These products don't involve owning Bitcoin directly but instead track futures contracts based on Bitcoin's expected future price.

Bitcoin futures require a separate futures account approval through Schwab, and you'll need to meet certain financial requirements and demonstrate trading experience. The leverage involved makes these products riskier than spot ETFs, but they also offer more sophisticated trading strategies.

Micro Bitcoin futures provide a smaller contract size, making them more accessible for individual investors who want futures exposure without the capital requirements of full-sized contracts.

Bitcoin-Related Stocks

Another approach involves investing in companies whose business models are closely tied to Bitcoin and cryptocurrency. Schwab offers commission-free trading in several prominent crypto-related stocks:

Coinbase (COIN) operates one of the largest cryptocurrency exchanges in the United States. Its revenue directly correlates with crypto trading volumes and adoption rates.

MicroStrategy (MSTR) has made Bitcoin a primary treasury asset, holding substantial amounts on its balance sheet. The stock often moves in tandem with Bitcoin prices.

Riot Platforms (RIOT) focuses on Bitcoin mining operations. Their profitability depends heavily on Bitcoin prices and mining difficulty adjustments.

These stocks provide leveraged exposure to Bitcoin. They often move more dramatically than Bitcoin itself, both up and down.

Thematic Investment Funds

Schwab's Crypto Thematic ETF (STCE) takes a broader approach, investing in companies that may benefit from cryptocurrency adoption and blockchain technology development. This fund doesn't hold Bitcoin directly but invests in the infrastructure and services supporting the digital asset ecosystem.

Similarly, certain mutual funds available through Schwab invest in cryptocurrency futures or companies operating in the digital asset world. These provide diversified exposure beyond just Bitcoin price movements.

How to Start Investing

Getting started with Bitcoin investments at Schwab follows the same process as any other investment:

Step 1: Ensure your Schwab account is funded and ready for trading.

Step 2: Use Schwab's research tools to explore available options. The Fund Finder tool includes a "Digital Assets" category that shows all cryptocurrency-related investment products.

Step 3: Decide which type of exposure fits your investment goals and risk tolerance.

Step 4: Place your order through Schwab's trading platform, either online or through their mobile app.

Step 5: Monitor your investment alongside your other holdings in your Schwab account.

For futures products, you'll need to complete additional account applications and meet specific requirements before trading.

Understanding the Costs

One major advantage of investing in Bitcoin through Schwab is the commission structure. The platform charges zero commission for buying and selling spot Bitcoin ETFs, crypto-related stocks, and most mutual funds.

However, you'll still pay the underlying fund expenses. Bitcoin ETFs typically charge annual expense ratios between 0.25% and 0.95%. While these fees are higher than broad market index funds, they're generally lower than actively managed funds.

Futures trading involves standard futures commissions and fees, which vary based on contract size and trading volume.

Weighing the Pros and Cons

Advantages of Schwab's Approach

Regulatory Security: All investments go through established regulatory channels with standard investor protections.

Portfolio Integration: Your Bitcoin exposure appears alongside traditional investments, making portfolio management simpler.

Professional Tools: Schwab's research platform, market analysis, and professional guidance extend to these cryptocurrency investments.

No Technical Complexity: You avoid dealing with crypto wallets, private keys, or exchange security concerns.

Notable Limitations

Indirect Exposure: You don't own actual Bitcoin, which means missing out on key advantages like using it as collateral for loans, participating in yield-generating activities, or having true ownership that can't be affected by fund management decisions.

Limited Selection: Your options are restricted to what Schwab offers, which is much narrower than the full cryptocurrency market where hundreds of digital assets are available.

Ongoing Management Fees: ETFs and mutual funds charge annual fees that compound over time, eating into returns, costs that direct Bitcoin ownership completely avoids.

Tracking Differences: Fund performance may not perfectly match Bitcoin's price due to fees, cash holdings, and other factors, potentially causing you to miss some of Bitcoin's gains during strong performance periods.

When Direct Bitcoin Ownership Makes Sense

Many investors prefer owning Bitcoin directly through fintech apps or exchanges. This approach is better especially if you want to use Bitcoin for transactions, participate in decentralized finance protocols, or have complete control over your holdings.

Direct ownership also opens up additional financial opportunities that aren't available with ETF shares. For instance, Bitcoin holders can use their cryptocurrency as collateral for loans, accessing liquidity without selling their holdings. This strategy allows investors to maintain their Bitcoin exposure while accessing cash for other investments or expenses.

Direct ownership requires more technical knowledge and responsibility for security, but it provides the full Bitcoin experience that indirect investments can't match.

Managing Risk and Expectations

Bitcoin remains volatile regardless of how you access it. Whether through Schwab's investment products or direct ownership, Bitcoin can experience significant price swings over short periods.

Consider these risk management principles:

Time Horizon: Bitcoin investments work best with longer time horizons that can weather volatility cycles. For investors who need access to liquidity while maintaining their Bitcoin position, cryptocurrency-backed lending solutions can provide cash flow without requiring a sale.

Tax Planning: Understand the tax implications of your chosen investment method, especially regarding retirement accounts. Using Bitcoin as collateral for loans can be more tax-efficient than selling, as borrowing against assets typically doesn't trigger taxable events.

Regular Review: Monitor your allocation as Bitcoin's price changes can quickly alter your portfolio balance.

Conclusion

Charles Schwab provides several viable pathways for Bitcoin investment, even without direct cryptocurrency trading. Spot Bitcoin ETFs offer the most straightforward exposure, while futures, stocks, and thematic funds provide different risk-return profiles.

This approach works particularly well for investors who want to integrate crypto exposure with traditional portfolios or prefer avoiding the technical aspects of direct cryptocurrency ownership. However, investors seeking maximum flexibility with their Bitcoin holdings should consider direct ownership alongside or instead of these traditional investment products.

For those who choose direct Bitcoin ownership, the ecosystem continues to evolve with new financial services that allow Bitcoin holders to unlock liquidity without selling their holdings. These innovations bridge the gap between holding cryptocurrency and accessing traditional financial services.

About Arch

Arch is building a next-gen wealth management platform for individuals holding alternative assets. Our flagship product is the crypto-backed loan, which allows you to securely and affordably borrow against your crypto. We also offer access to bank-grade custody, trading and staking services.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrency investments are volatile and risky. Always conduct your own research before making investment decisions.