After years of speculation and anticipation, financial services behemoth Charles Schwab is finally on the verge of entering the spot cryptocurrency market in the coming weeks. The bank's clients will gain an opportunity to directly trade Bitcoin and Ethereum within the comfort of their existing brokerage accounts.
However, according to Bloomberg's Eric Balchunas, the new offering will be a rather tough sell. He has predicted that it will struggle to compete with existing ETF offerings.
More cryptocurrencies
After debuting with Bitcoin (BTC) and Ethereum (ETH), Schwab eventually plans to extend the list of available cryptocurrencies.
However, it is worth noting that it will charge 75 basis points (0.75%) on the dollar value of each individual crypto trade.
Balchunas acknowledged that Schwab's integrated trading feature is "definitely [a] better deal than most crypto exchanges for newbies." It would still be a better option for newcomers compared to traditional digital asset exchanges of the likes of Coinbase, which are known for their notoriously high fees.
Still, Balchunas has recalled the rock-bottom costs of buying a spot crypto ETF."IMO it’s a tough sell vs ETFs (which are 2bps to buy vs 75bps for Schwab direct)," Balchunas stated.
Of course, direct ownership of coins is a major long-term advantage, according to Balchunas. Direct crypto purchases do not incur an ongoing yearly management fee. Hence, it will be possible to offset the steep initial trading cost for those who decide to hold BTC for a long period of time.
Balchunas offered investors a straightforward rule of thumb regarding the break-even point between the two investment vehicles. "Bottom line: if you buy BTC one time and one time only and plan to hold 5+ yrs then direct is cheaper," Balchunas concluded. "Otherwise ETFs for the win all day long."
Dan Burgin
U.Today Editorial Team
