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Benjamin Schmitz

Can I use a robo advisor to invest in cryptocurrency?

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Robo advisors really began to take off after the financial crisis of 2008. The two main stand-alone robo advisors, Betterment and Wealthfront, led the pack until Vanguard and Charles Schwab got into the robo advisor market. Experts expect some $800 billion to flow into robo advisors - exceeding $1 trillion under management by 2020. Given the size of the robo advisor market, and the astonishing interest in cryptocurrency, it’s not surprising there are now robo advisors specializing in the crypto niche. What is surprising is that it’s taken so long. A San Francisco start-up called New Wave Capital is the first robo advisor specializing in cryptocurrency. They believe that cryptocurrency shouldn’t be reserved for accredited investors with $250,000 or $1 million to invest. New Wave has a manageable $1,000 minimum investment and it offers 12 different coins: Bitcoin, Bitcoin cash, ether, Ethereum classic, golem, Litecoin, Numeraire, OmiseGo, ripple, stellar lumens, TenX, and ZCash. Its algorithm is designed using a different risk tolerance scale based around the unique crypto market. If you have a low-risk tolerance, your account is weighted more toward bitcoin. Higher risk gets you into the more volatile cryptocurrencies. The firm is registered with the SEC and charges 0.25% for its management cut. Other companies, such as Automata and Empirica, are also entering the robo advisor cryptocurrency niche, and Grayscale Investments offers broad crypto exposure with its Digital Large Cap Fund, but it’s definitely not considered a robo advisor. There are also automated investment options focusing on crypto that fall somewhat short of a true robo advisor platform but may appeal to crypto investors. Circle now has a “buy the market” feature that spreads your deposits among its list of supported currencies, which currently stands at seven. Robinhood launched a Robinhood Crypto platform that allows users to buy any of the five digital currencies it supports, Robinhood Crypto isn’t widely available. Currently, it’s only available in 17 states, and again, it’s not a robo advisor service.

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