Fidelity launches retail crypto trading

Fidelity Investments is launching a crypto trading service aimed at retail investors.

This was reported by CNBC, revealing that yesterday morning the company opened enrollment on a special waiting list for access to the service. 

On its official website, Fidelity already hosts a zero-commission trading platform on stocks, options, ETFs, mutual funds, CDs, IPOs and precious metals. Cryptocurrencies will soon be added to these assets. 

The website also hosts a crypto section, on which it is possible to sign up for the crypto trading waitlist. 

This section states that initially only Bitcoin and Ethereum can be traded, without having to worry about token management. 

Therefore it will probably not be an exchange with deposit and withdrawal functions, but just adding crypto assets to the existing ones on their trading platform. 

The Fidelity Crypto service is offered by Fidelity Digital Assets, which is Fidelity Investments’ subsidiary dedicated to cryptocurrencies and digital assets. In addition, the service also offers a Crypto Help Desk, or virtual support that is always active to answer users’ questions. 

Fidelity Crypto and trading for retail clients

Fidelity Crypto allows users to buy and sell Bitcoin and Ethereum within the Fidelity Investments app, with a custody service provided by Fidelity Digital Assets. 

They are careful to point out on the website that Fidelity Crypto is neither a cryptocurrency nor a token, but only an additional service integrated into the company’s generic trading app.

The fact that the service is aimed specifically at retail investors, and therefore not professionals, is evident from the fact that an always-on Crypto Help Desk has been made available that provides quick answers. This means that many simple questions will be answered. 

They have also opened their own subreddit and channel on Discord. 

The service will initially only be active in the US, and initially will only allow the exchange of BTC and ETH. However, they state that other cryptocurrencies are already being evaluated to expand trading opportunities over time.

They also state that cryptocurrency deposits and withdrawals will not be possible within their app for now, but that they are already working on new features. 

Fidelity Investments and the new crypto trading service

Fidelity Investments is an American multinational financial services company based in Boston. It was founded in 1946 and is now one of the world’s largest asset managers, with about $4.5 trillion in assets under management and $24 billion in revenues.

The group includes a brokerage firm, an entire family of mutual funds, retirement services, asset management, asset custody, life insurance, and consulting. 

For the past few years, it has also been providing crypto services through its subsidiary Fidelity Digital Assets. 

Overall, the group has more than 70,000 employees, and offers services not only to financial professionals but also to individuals. 

In particular, many of their crypto services are aimed precisely at private investors. 

Retail investors

There was a time when the vast majority of investments were made through specialized professional traders who also acted as intermediaries for end users. 

In contrast, since the emergence of online trading platforms many private investors, known as “retail,” have begun to invest themselves, without intermediaries. 

The generic term “retail” actually refers to retail sales to private citizens, that is, those aimed directly at the end consumer. In the financial sphere it refers to those services offered directly to investors, i.e., what could be called the “end consumers” of financial products, and not to professionals or companies. 

Fidelity has long been present in the retail financial market thanks in particular to its pension services, aimed precisely at the end consumer of this type of financial product. Thus, it is by no means a coincidence that it has long since begun to offer trading services to such customers as well. 

According to some estimates referring to 2020, there would be about 100 million retail investors in the crypto markets worldwide, and by 2021 they have increased if not doubled. 

It is therefore safe to imagine that among Fidelity’s retail clients there are many interested in investing in cryptocurrencies. 

Bitcoin (BTC) and Ethereum (ETH)

The reason why for now Fidelity has decided to make only the trading of BTC and ETH available seems to be related to the soundness and reputation of these two cryptocurrencies. 

It is worth keeping in mind that Fidelity is a solid, traditional, and established brand. It certainly cannot expose itself to excessive risk, because many of its clients are not aggressive traders accustomed to risk and loss, but retirees who manage their assets prudently and cautiously. 

For this reason, it is possible that during the current bear market, the percentage of assets they will allocate to crypto investments will be decidedly low. 

Right now Bitcoin and Ethereum are the only two cryptocurrencies, excluding stablecoins, that seem to be able to give a minimum of assurance. There would actually be BNB as well, because it has the world’s largest crypto exchange (Binance) behind it, but Binance remains a significant entrepreneurial risk business, and this also elevates BNB’s risk level. It is also a de facto competitor to Fidelity’s crypto trading platform. 

Perhaps only XRP could be on the list of cryptocurrencies eligible to be listed on the Fidelity app, but only if Ripple wins its lawsuit against the SEC. 

However, this scenario could change in the future if other cryptocurrencies manage to show similar signs of solidity to those already largely provided by BTC and ETH over the years. 

It is worth mentioning that Bitcoin and Ethereum are highly volatile cryptocurrencies and indeed this is precisely why they attract interest. 

Motivations

A Fidelity spokesperson spoke in response to a CNBC interview about the new crypto trading service, saying: 

“Where our customers invest matters more than ever. A meaningful portion of Fidelity customers are already interested in and own crypto. We are providing them with tools to support their choice, so they can benefit from Fidelity’s education, research, and technology.”

Hence trivially, the motivation behind the new service is to offer its customers a service they could previously only find elsewhere, and which many are probably already using. 

As is often the case, it is the customers themselves who move faster and earlier, while large companies evolve more slowly. 

It is enough to consider that what is to date the largest crypto exchange in the world (Binance) was born from nothing only five years ago, as a private initiative of a group of entrepreneurs, investors and developers. The other major giant in the industry, Coinbase, was also born this way. 

The big names that have been present within the financial industry for decades all came later, precisely because they were too big to evolve so quickly. 

Yet now that their own customers have moved some of their capital to the crypto markets, they are being forced to run for cover and rapidly do what they have been unwilling to do in past years.