In the traditional financial markets, investors generally need to open a brokerage account with a firm that provides the services and the interaction that the
investor desires. If they want to simply trade stocks at the lowest price, there
is no lack of discount brokers to pick among. A higher-touch relationship may
require a full-service firm that has a venerable name and reputation that makes
one comfortable. Each one of these traditional businesses can, nonetheless,
access many of the same products, such as stocks, at almost identical prices,
irrespective of where the initial order originates.
There is a long history of best practices and regulations in the brokerage
world. For instance, customer accounts should be segregated from the firm
account, which isolates them from any financial problems at the brokerage
firm. The collapse of Lehman Brothers is a good example, where brokerage
customers were not impacted by the brokerage firm’s default and had almost
immediate access to their stocks and bonds.
All brokerage accounts are also insured by the Securities Investors Protection Corporation (SIPC) that covers their assets when they have been misappropriated, usually through theft or fraud by the brokerage firm. This insurance has to return the full value of portfolio assets to the investor if they are within the SIPC guidelines.
Using Wall Street for Crypto Investing
There are additional ways to participate in cryptocurrency trading without
owning digital coins directly. As mentioned, the CBOE and CME both offer
Bitcoin futures, which have seen a steady increase in volumes, although small
relative to other more established financial contracts for interest rates, equity
indices, and gold. There are also a limited number of ETFs that hold various
interests in actual coins or futures contracts. There are also new ETFs that
invest in firms involved in blockchain technology, although their top holdings
are in tech firms that have embraced the blockchains, such as Microsoft,
Overstock, and NVIDIA.
There will undoubtedly be more ETFs that will be introduced in the coming year as interest remains high in the crypto currency space. The advantage of these products is their ability to tap into existing brokerage accounts, although it should be noted that some brokers restrict access to these investments.