Wealthsimple Crypto: What’s The Catch?

Have you heard of the Wealthsimple Crypto? With Wealthsimple Crypto you can buy, sell, and hold Bitcoins and Ethereum within the app. Please note that deposits and withdrawals can only be made in Canadian dollars at the moment, using the Wealthsimple Trade app.

Currently, the Wealthsimple Trade platform offers 2 cryptocurrencies – Bitcoin and Ethereum to buy, sell and hold. You cannot transfer the digital money to other parties. Well, I have no complaints here, just wanted to share a few things about Wealthsimple Crypto in general. 

Personally, I have been using the Wealthsimple app platform for some time now and it’s all great. 

The app will get you started with the investment mindset through the basic round off (from your credit/debit card purchases) and puts it in a growth/debt fund as per your choice. (you need to make a choice here out of 10, with 10 being all your money goes into equities and, 90% equity and 10% bonds for all growth portfolio). 

So, in a nutshell, the Wealthsimple platform is good and fine. It’s extremely popular now and rightly so. Please continue using it as you are. It’s excellent in fact unless you are the nerdy kind who knows where to invest 🙂

We’re here to talk about the Wealthsimple Trade platform and should you invest in the Cryptocurrencies there – Bitcoin and Ethereum. What’s the catch here. 

Let’s begin. 

Bitcoin

What Does The Wealthsimple Crypto Offer?

Before we begin, the Wealthsimple Cryptocurrency platform was launched very recently and as always it was invite-based. 

Oh, did I forget to mention, Wealthsimple Trade offers Cryptocurrency trading along with stocks and ETFs as usual. Trading Crypto was the recent addition to the already existing platform of stocks. And it’s all for a $0 commission fee. That is no charges to buy/sell/hold stocks in your TFSAs and RRSPs.  (Just make sure that you are within the limits, or the taxman will be waiting to fine you at 2% for over-contributing). 

Using the Wealthsimple Trade app, you can buy, sell and hold Bitcoin or Ethereum.

However, the catch is that you’ll not be able to transfer the digital currencies, be it Bitcoin or Ethereum. Remember that!

If this is the case, then please answer this question for me, what is the purpose of buying the cryptocurrency – Bitcoin or Ethereum, is it just to make profits and sell? 

Sorry, but I thought the sole purpose of buying the Cryptos is something else. I thought Bitcoins are used to transact and transfer using the digital currency to merchants or vendors. For example: Whether you shop at Costco UK or Costco US the value of the Bitcoin remains the same. All you need is a private key to access your Bitcoin and you hold it in a safe vault. So, that no can steal or hack your priced asset. Correct? 

Let’s look at what Wealthsimple Trade has to say here: (regarding the storage)

Coins are held by Gemini Custody, a regulated crypto custodian. This means Gemini is regularly audited and subject to the compliance standards of a traditional financial institution. Wealthsimple Digital Assets access to your crypto-assets held at Gemini is permitted only to settle sell transactions initiated by you.

We chose Gemini based because of its regulated status as a trusted company and the security that provides compared to an unregulated trading platform.

However, third-part custody comes with some different risks than a private wallet. Gemini also has $200M in cold storage insurance coverage.

Another important detail I noticed is this: 

Even though Wealthsimple Trade says that there are absolutely no fees for the below services: 

Description Amount
Commission Fees $0
Account Opening $0
Account Closing $0
Deposits via Bank Transfer (EFT) $0
Withdrawals via Bank Transfer (EFT) $0
Electronic Statements and Trade Confirmations $0
Inactive Accounts $0

Source: Wealthsimple 

Look at this fine print: 

The only trading fee we charge is applying a spread on the bid and ask prices at which buy orders and sell orders execute. Trading spreads are presented in the Wealthsimple Trade app.

For illustrative purposes, if you place an order to buy $100 of bitcoin and the trading spread is 150bps, you will pay $1.50 for the transaction. This spread covers custodial expenses charged by our third-party custodian, Gemini, and Wealthsimple business costs.

Please read the above lines carefully, again!

So, not everything’s free with the Wealthsimple Crypto. Get the facts right! There’s a catch. 

And the catch is – If you for instance buy the Bitcoin at the current price of $24,000 CAD (approximately), you’ll end up paying almost $1.50 for the spread. Or 1.5% of the total transaction amount. The spread can vary. 

Here’s something more interesting: 

“Cryptocurrencies can only be held in a non-registered account with Wealthsimple Crypto.” Wealthsimple Trade. 

The above line means that you’ll have to pay taxes on the capital gains you make. And that’s when you sell your Bitcoins and take the profit. That’s because you cannot hold the cryptocurrency in your TFSAs or RRSPs. 

In Canada, 50% of the value of any capital gains is taxable. 

If you really think that was everything for today, you’re not done yet. There’s more news for you from Wealthsimple Trade. 

Please read the below note regarding your Crypto holdings/assets and CDIC insurance coverage.

Crypto-assets purchased and held in an account with Wealthsimple Crypto are not protected by the Canadian Investor Protection Fund, the Canadian Deposit Insurance Corporation or any other investor protection insurance scheme.

You can find more information about Wealthsimple Digital Assets in our Client Relationship Disclosure.

What that means is, in case your Wealthsimple Trade account gets hacked or stolen for whatever reason or your Bitcoin gets lost/stolen or hacked, Wealthsimple nor CDIC will cover ANY of your money. In simple words, you have lost the money you had invested. Simple and straight. 

That’s heartbreaking really!

Moving on!

Another question that needs to be answered is – Why does Wealthsimple Trade offer just Bitcoin and Ethereum when there are so many currencies out there? Correct? What about the other cryptos? When can you expect them to be added to the app? 

Now, that’s a fair question to ask. 

Here’s what Wealthsimple has to say regarding this – 

As you may have noticed, we like keeping things simple.

That’s why we’re starting out by offering Bitcoin and Ethereum. They’re two of the highest market cap and most popular cryptocurrencies. We do plan to offer more in the future — stay tuned.

Well, there you go. 

Anyways, Bitcoin and Ethereum are two of the highest market cap cryptocurrencies currently in the world, at the moment. 

If you have been following the Bitcoin (BTC) latest news or podcasts, you’ll know that Paypal and Robinhood are offering Bitcoin and Ethereum trading on their platforms as well. In fact, even the popular cash app square does that.  

Looks like all the major fintech companies are getting into the crypto space, driving up the prices. As is there is a limited supply of 21 million Bitcoins that can be mined. And the news is that 18.7 million Bitcoins are already mined. Especially when companies like Paypal start accepting Bitcoins for transactions, the demand will definitely surge in the usage. 

Bitcoin

My Personal take on the Cryptocurrency Market and Wealthsimple Trade – Is It Worth Taking a Shot? 

Seriously No!

Do not spend your hard-earned cash on these cryptocurrencies or digital assets/coins. 

Don’t lose your money, please!

Remember, Making money is not easy, whereas losing it is quite simple and can happen within minutes.

The price of BTC (Bitcoin) currently is around $20K.

Back in 2017, the price of Bitcoin was very similar and it crashed almost instantly.

Even now in 2020, the run-up has been huge. The fluctuations and volatility of BTC is insane. 

That’s something which you don’t want. 

If you want to be a risk-taker, there are options out there, look at the equities or stocks. There are plenty of high growth stocks available which can 5X or 10X your money. And, I am not talking about NIO. Others please! NIO is not the only one for god’s sake. 

Just don’t get into these crypto gambles, even if you win, it’s not worth the risk. These gains will not last. Just because some of the big players are getting into space, doesn’t mean small-time investors with bare minimum cash like me you and I should get into, as well. 

In case you have a portfolio worth more than $100K (like our YouTuber Jeremy), you can probably invest 1% of that money into Bitcoin and Chinese stocks. That’s my personal take on safeguarding my investments and money. I’ll leave that decision for you to make. 

By using the Wealthsimple Trade platform to buy the cryptocurrencies, you’ll not be getting the private key which is the most important part of owning/possessing a Bitcoin. So forget even using the platform. It’s like owning a car without the keys. That’s the case with Paypal, Square, Robinhood as well. You’ll not get the private key to access your Bitcoin and without the Private key, you can’t transfer or do any transactions with your Bitcoin. So, why are you investing in Bitcoin then? I mean through Wealthsimple Trade. 

Bitcoin price as of today: 

Bitcoin price

Ethereum price as of today: 

Ethereum price in USD

Final Words

So, should you buy Bitcoin or Ethereum from the Wealthsimple Trade app? The answer is a strong “NO”. 

Don’t do it. Unless you are like “I know Bitcoin will reach $300,000 by the end of December 2021”. I watched a YouTuber talk about it, with proof. 

A couple of key points here: 

Look, First of all, you are not insured in case your Bitcoin gets lost or stolen by the CDIC or from Wealthsimple Trade. 

Second, you don’t get the private key, which is why people buy and hold cryptocurrencies in the first place. Without that, you are good without having to buy the Bitcoin or Crypto. 

Moreover, Facebook’s Libra is getting launched shortly (Jan or Feb, 21, not sure). It’s a Crypto and a digital currency again! And from Facebook who are the biggest data-thieves ever (Cambridge scandal)! Now, they are getting into the Crypto market (which is quite understandable).

Anyways, Crypto’s might be here to stay, but I’m never going to invest in it, even if it reaches a Million! I don’t need that free money and the ride.

Gold is a solid investment if you ask me, it has value and people understand what it is. It’s a commodity after all. People comparing the price of Gold to Bitcoin is something I don’t want to comment upon. But, the question really is why is ARK investing in Bitcoin? Gosh.   What’s wrong with Cathie Woods. 

Thanks for reading! Let me know your thoughts and comments below. 

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