Crypto Portfolios Disclosure

Updated September 12, 2023

Betterment crypto portfolio strategies (“Crypto Portfolios”) are constructed of digital assets and a cash allocation. Digital assets (referred to as “crypto” or “crypto assets”) are selected to provide clients with diversified exposure to the crypto industry and certain sectors. Betterment offers a Betterment Universe Portfolio designed to provide broad exposure to major sectors of crypto, as well as a Sustainable Crypto portfolio designed to emphasize energy efficiency. The following disclosures address items generally applicable to all Crypto Portfolios, and then discuss the features and risks particular to each of the Universe, Sustainable Crypto, and Bitcoin/Ethereum portfolios.


  1. General Construction of Crypto Portfolios

Betterment both selects the crypto assets for inclusion in the Crypto Portfolios as well as selects the weights with which to allocate client assets within the Crypto Portfolio. 

A. Crypto Asset Selection

Crypto assets are screened by Betterment before they are eligible for inclusion in the Betterment Crypto Portfolios. The screening process for Betterment constructed Crypto Portfolios is based on several criteria, including the market capitalization of the asset, liquidity profile, and whether the asset is supported by Gemini Trust Company, LLC (“Gemini”) for custody. Crypto assets are generally excluded from consideration if the asset is considered a stablecoin, has been deemed a security by U.S. Congressional statute, final regulatory rulemaking of a U.S. regulator, or pursuant to a final court decision, is an asset-backed token with no investable criteria related to crypto, does not have sufficient verifiable trading history and historical data, and does not meet Betterment requirements for market capitalization and liquidity. Betterment also considers subjective criteria including significant news information about a crypto asset and other risk-related issues of concern. These screening criteria are designed to ensure that the crypto assets included in Betterment’s Crypto Portfolios represent a diversified array of crypto assets across the crypto market with sufficient trading history and liquidity for client investment. Betterment also regularly monitors the available population of crypto assets with respect to existing portfolio strategies, and to identify new assets or crypto portfolio strategies for development. Betterment may elect to add or remove crypto assets from a Crypto Portfolio, or create a new Crypto Portfolio.

B. Portfolio Construction

Once the crypto asset selection has been completed, the crypto assets that have been selected for inclusion are divided across two portfolios with some asset overlap between them: Universe, Sustainable Crypto, and Bitcoin/Ethereum portfolios.

The Betterment Universe Portfolio was constructed as a blend of two methodologies known as Market Capitalization and Hierarchical Risk Parity (HRP). A Market Capitalization-weighted portfolio is an index portfolio weighted by market capitalization of the constituent crypto assets of the portfolio. In a Market Capitalization- weighted portfolio, crypto assets that have a larger market capitalization are allocated a larger percentage weight in the portfolio relative to crypto assets that have a smaller market capitalization. Market Capitalization for a crypto asset is calculated by multiplying the current asset price of a crypto asset by its circulating supply. Betterment considers Market Capitalization metrics from CoinGecko, a provider of crypto industry financial metrics. See CoinGecko’s methodology for more details. Crypto assets measured by Market Capitalization may differ, and their Market Capitalization may change over time. Crypto assets are also highly volatile, which impacts their Market Capitalization. For more information on crypto market risks, see “Generally applicable risks to crypto investing” below. Additionally, the criteria used to measure the Market Capitalization of crypto assets may change over time, and methodologies from different data providers may differ. On a periodic basis, Betterment will review average Market Capitalization metrics across crypto assets in the Crypto Portfolios and update allocation weights in the target Crypto Portfolios. 

Hierarchical Risk Parity (HRP) uses a risk-parity methodology to augment the market capitalization weighted portfolio. Betterment’s HRP methodology is based on the approach by economist Marcos Lopez de Prado in 2016 (see whitepaper for more information about the methodology).1 At a high-level, HRP weights assets in a portfolio by their risk correlation within the portfolio. Clients should understand that, although Betterment seeks to optimize returns and minimize risks through HRP, Betterment makes no performance guarantees. Correlation distance, risk profile, and expected returns may change over time, and methodologies for calculating these metrics may differ and change over time. Betterment may update its HRP methodology based on new information and/or modeling approaches. On a periodic basis, Betterment will review HRP metrics across crypto assets in the Crypto Portfolios and recalculate HRP metrics based on a rolling historical lookback period.

C. Universe Portfolio Construction

The Betterment Universe Portfolio is intended to offer a set of broadly diversified crypto assets. It provides a broad allocation based on a combination of the above-described Market Capitalization and Hierarchical Risk Parity (HRP) weightings. 

D. Sustainable Crypto Portfolio Construction

The Betterment Sustainable Crypto Portfolio comprises many of the same assets as the  Universe Portfolio and relies on the same Market Capitalization and HRP construction approaches, but with an emphasis on energy efficiency. In particular, this portfolio excludes any digital assets and protocols that use proof of work (PoW) to validate transactions, because PoW (utilized by Bitcoin and others) is an energy-intensive consensus mechanism that requires specialized hardware and significant computing power. Many blockchains utilize other consensus mechanisms that do not require these energy-intensive activities, primarily proof of stake (PoS) consensus mechanisms. Our selection criteria for the Sustainable Crypto Portfolio includes Layer-1 blockchain tokens (like Ethereum) that do not utilize the POW consensus mechanism, and coins that are built on those Layer-1 blockchains. After screening for energy efficiency, construction of the Betterment Sustainable Crypto Portfolio involves implementation of Market Capitalization and HRP.

E. Bitcoin/Ethereum Portfolio Construction

The Betterment BTC/ETH Portfolio is comprised of Bitcoin and Ethereum. The Portfolio allocation to Bitcoin and Ethereum is based on each asset's relative market capitalization as sourced from CoinGecko (as previously mentioned, 1.B.)


  1. Rebalancing Behavior

Betterment will generally seek to rebalance a Crypto Portfolio so that, in the face of fluctuating prices, it remains within a range of the target allocation of the Crypto Portfolio. Betterment typically attempts to rebalance a client’s account when a Crypto Portfolio is identified as having drifted from its intended allocation outside of certain tolerance parameters and when Betterment’s rebalancing algorithm can identify sufficient rebalancing opportunities (i.e. trades) to reduce drift. The tolerance parameters Betterment uses to rebalance crypto accounts may change over time. 

Importantly, rebalancing will not take place where potential trades are below Gemini’s minimum order sizes for trades on its exchange. Gemini’s minimum order sizes fluctuate based on market conditions, and can increase or decrease month to month. Clients can review an estimated minimum account balance necessary to exceed these thresholds at

Due to limitations of Gemini, Betterment is not able to track tax information for crypto assets. Any transactions involving crypto assets, including automatic rebalancing, can result in taxes, including at short term capital gains rates. Tax consequences are not factored into Betterment’s rebalancing parameters.  Furthermore, rebalancing cannot be disabled for a Crypto Portfolio.

Clients should be aware that Betterment may not be able to fully reduce drift in a Crypto Portfolio through rebalancing. Betterment may be unable to fully reduce drift if a client has elected to exclude crypto assets from their Crypto Portfolio, using the block cryptocurrencies feature in their settings (described in more detail below in “Block Cryptocurrencies Feature”). Betterment is also constrained by available liquidity at Gemini. If liquidity is unavailable in certain crypto assets, or if Gemini takes certain actions to freeze, suspend trading, or delist a crypto asset, Betterment will be unable to rebalance client’s Crypto Portfolio at that time or in those impacted assets.

If Betterment rebalances a portfolio to remove tokens, liquidity constraints may result in delayed withdrawal timelines relative to those set forth in the Betterment client agreements.


  1. Block Cryptocurrencies Feature

Betterment gives clients the opportunity to further customize their Crypto Portfolio by electing to exclude (or include if they previously excluded) crypto assets from their Crypto Portfolio. For example, if a client already has exposure to Bitcoin outside of Betterment’s portfolio, they may elect to exclude Bitcoin from their Betterment Crypto Portfolio. Clients should be aware that excluded assets apply to client’s selected Crypto Portfolio, but if client maintains two Crypto Portfolios with Betterment and wants to exclude a crypto asset from both portfolios, clients will need to make that election in their account settings for both Crypto Portfolios. 

When assets are excluded from the Crypto Portfolio, Betterment generally re-allocates the excluded assets’ weighting in the portfolio to other assets based on their allocation weights within the selected Crypto Portfolio. This reallocation triggers rebalancing transactions, and may have tax consequences. Clients should understand that electing to modify or exclude assets from a Crypto Portfolio may also cause their individual holdings to diverge from the Betterment target allocation of the Crypto Portfolio, may concentrate their investments in certain crypto industries or sectors, and can limit the ability for rebalancing to reduce drift in their portfolio. This may increase the risk of loss due to adverse economic, business, or other developments that affect those remaining crypto assets. Reduced diversification may also increase the volatility of the client’s Crypto Portfolio relative to its target. Betterment makes no guarantees that a Crypto Portfolio with removed crypto assets will perform similarly to the Betterment constructed Crypto Portfolio, and clients should understand these risks.


  1. Low Balance Behavior

Betterment’s crypto custodian and trading exchange partner, Gemini, maintains minimum order sizes in order to place crypto trades on its exchange. Gemini’s minimum order sizes fluctuate based on market conditions, and can increase or decrease month to month. Clients can review an estimated minimum account balance necessary to exceed these thresholds at Although Betterment will endeavor to implement minimum order size changes monthly (to the extent they fluctuate) after they are communicated by Gemini, clients should understand that there may be implementation delays.

Crypto Portfolios at low balances and/or with crypto holdings below Gemini’s minimum order sizes may be less liquid than a comparable Crypto Portfolio exceeding Gemini’s minimum order sizes. This means that it may be more difficult to buy and sell certain crypto assets in the relevant Crypto Portfolio without affecting their prices. As a result, there may be increased trading costs to enter or exit positions in the Crypto Portfolio at low balances relative to the same crypto assets in a Crypto Portfolio at a higher balance. This also may result in wider discrepancies between the market prices of the crypto assets in the portfolio at low balances, particularly during times of market stress. Clients with holdings in particular crypto assets (i) below Gemini’s minimum order size or (ii) due to liquidity constraints at Gemini, may be unable to sell out of or withdraw funds invested in that crypto asset.

Clients should understand that Betterment will be unable to purchase the full number of coins in a Crypto Portfolio if the client deposits or maintains less than a specified minimum account balance. In the event the client deposits less than the required account balance, Betterment will endeavor to invest client funds in crypto assets to the extent it can place orders for such assets above Gemini’s minimum, but certain assets in the portfolio will be unable to be purchased below Gemini’s minimum order size. Clients should understand that for crypto assets that Betterment is unable to purchase, Betterment will hold an affected coin’s allocation in the portfolio in cash until the client either deposits additional funds or Gemini’s minimum order size for that coin is reduced.

Maintaining a low balance Crypto Portfolio may cause a client’s portfolio to become less diversified than the comparable target Crypto Portfolio because the allocation of particular coins below Gemini’s order minimum to cash may concentrate client investments in certain crypto industries or sectors. This may increase the risk of loss due to adverse economic, business, or other developments that affect those remaining crypto assets. Reduced diversification may also increase the volatility of the client’s Crypto Portfolio relative to its target. Betterment makes no guarantees that a Crypto Portfolio at a low account balance will perform similarly to the target allocation for the Crypto Portfolio, and clients should understand these risks.

Additionally, as described above in “Rebalancing Behavior”, clients who maintain a Crypto Portfolio below Gemini’s order minimums will not be eligible for rebalancing. Betterment’s rebalancing software requires an account balance that will allow Betterment to place trades with Gemini’s exchange, and therefore only will identify rebalancing opportunities when trades can be placed above Gemini’s minimum order size requirements.


  1. Tax Behavior, Dividends, Forks & Airdrops, Proxy Voting

Investors considering investing in Crypto Portfolios should understand that Crypto Portfolios are not compatible with Betterment’s suite of tax feature functionality, including tax loss harvesting, tax coordinated portfolios, and tax minimization. Crypto also does not typically pay dividends, and clients who invest in Crypto Portfolios will not receive crypto dividends from the assets in their Crypto Portfolios. Crypto Portfolios are also not compatible with Betterment’s automatic dividend reinvestment feature. 

Crypto Portfolios do not currently support digital asset forks or airdrops. Forks and airdrops may adversely impact the value of an original crypto asset and the successor crypto asset. Gemini, as the custodian of client crypto accounts, has sole discretion to decide whether or not to support forks and airdrops into client accounts. Gemini may (i) not accommodate the new crypto asset; (ii) only accommodate the new crypto asset after a significant period; or (iii) have a contractual right to claim the new crypto asset for its own account. Absent Gemini, Betterment does not have any systems in place to participate in forks or airdrops. As a result of the foregoing, clients may not benefit from crypto assets provided through airdrops, and crypto assets subject to forks may be rendered useless or of no or little value. 

Clients who invest in Crypto Portfolios should be aware that Betterment will not accept authority to vote proxies for clients’ crypto assets. Some crypto asset features, including participation in governance activities, may be considered similar to participating in shareholder votes. Though some crypto asset holders have the ability to vote on topics that directly or indirectly affect return on investment through on-chain governance, Gemini’s infrastructure does not support this capability and makes no promise of doing so in the future. As such, clients with Crypto Portfolios are currently unable to participate in crypto governance activities for crypto assets held in their crypto account. 


  1. Custodian

Betterment partners with Gemini Trust Company, LLC, a New York state registered trust company, to provide crypto custody and trade execution services. Clients who elect to invest in crypto must open crypto accounts with Gemini and agree to Gemini’s User Agreement in order to receive Betterment’s crypto investment advisory services.

Betterment relies on Gemini for custody and trading services, and any operational issues at Gemini could impact clients’ ability to transact in crypto. In the event that Gemini is unable to fulfill Betterment’s trading orders, or markets for a particular crypto asset become unavailable or illiquid, clients may be unable to sell their crypto assets at all, or at an advantageous time or price. Gemini has the ability to freeze, suspend trading in, or delist crypto assets, and may do so in the event of certain market events or regulatory actions. Gemini also has the ability to freeze trading in a particular client account if it identifies the account has received assets that are subject to scrutiny (including but not limited to anti-money laundering and fraud risks). If Gemini were to freeze trading in a client account, the client would be unable to transact until Gemini lifted the freeze. If Gemini were to freeze trading in a particular crypto asset or delist a crypto asset, for regulatory or other reasons, clients invested in that asset would be unable to sell out of or withdraw funds from that crypto asset. 

If Gemini, or any other service provider upon which Betterment relies, were to experience financial, regulatory, or other difficulties that adversely affect their operations, client Crypto Portfolios would be adversely affected. This is particularly acute in light of the changing regulatory environment for crypto assets. If Gemini is no longer able to successfully provide services to Betterment clients, and an alternative custodian is not immediately available, this could have an impact on Betterment and its services. 


  1. Generally applicable risks of crypto investing

Crypto Assets. Crypto assets represent a speculative investment and involve a high degree of risk.  Supply generally is determined by a computer code, not by a central bank or identifiable legal entity, and prices can be extremely volatile. Crypto exchanges have been closed due to fraud, failure, security breaches, and legal noncompliance. Client assets held on a crypto asset exchange that shuts down may be lost.  Several factors may affect the price of crypto assets, including, but not limited to supply and demand, investors’ expectations with respect to the rate of inflation, interest rates, currency exchange rates or future regulatory measures (if any) that restrict the trading of crypto or the use of crypto as a form of payment. There is no assurance that cryptocurrencies and/or crypto assets will maintain their long-term value in terms of purchasing power in the future, or that acceptance of cryptocurrency payments by mainstream retail merchants and commercial businesses will grow.  Some risks particular to crypto assets include:

  • Volatility: Crypto assets generally are highly volatile and speculative. The prior performance of a crypto asset is not necessarily indicative of future results.  Many crypto assets have experienced high levels of performance and rapid increases in price, followed by significant downturns in performance and similarly rapid decreases in price. Clients should be prepared to bear the risk of loss of their investment in crypto assets.
  • Limited Investment history: Crypto assets have only emerged as an investment opportunity in the past several years and are thus a relatively untested source of returns. It is unclear what the long-term profitability of crypto assets will be, and their short history thus far is particularly unreliable for predicting future success.
  • Availability and Free tradability: Betterment will only incorporate a limited number of types of crypto assets into its Crypto Portfolios, and therefore clients may not have exposure to many other types of crypto asset investments through Betterment. Additionally, if regulators find that crypto assets that are incorporated into Crypto Portfolios are not freely tradeable and/or constitute securities, this could adversely affect their value and the number of crypto assets available through Betterment’s Crypto Portfolios.
  • Technology Risk: Crypto assets are created, issued, transmitted, and stored according to protocols run by computers in the crypto assets network. It is possible these protocols have undiscovered flaws which could result in the loss of some or all client assets. There may also be network scale attacks against these protocols that result in the loss of some or all client assets. Some assets may be created, issued, or transmitted using experimental cryptography that could have underlying flaws. Advancements in quantum computing could break the cryptographic rules of protocols that may be negatively affected by technological advances that undermine the cryptographic consensus mechanism underpinning blockchain and distributed ledger protocols. Betterment makes no guarantees about the reliability of the cryptography used to create, issue, or transmit crypto assets. 
  • Blockchain Risk: Certain crypto assets may rely on or are built on a public or third-party blockchain, and the success of such blockchain may have a direct impact on the success of the crypto assets, as well as the success of other blockchain and decentralized data storage systems that are being used by the crypto assets.  There is no guarantee that any of these systems or their sponsors will continue to exist or be successful.  This could lead to disruptions of the operations of the crypto assets listed on the platform and could negatively affect any crypto assets held by a client.    

No FDIC or SIPC Protection: Crypto assets are not legal tender and are not backed by the U.S. government. Crypto assets are also not subject to Federal Deposit Insurance Corporation (“FDIC”) or Securities Investor Protection Corporation (“SIPC”) protections, and therefore client crypto assets are not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions. While private insurance may be available at times, client crypto assets are not insured by Betterment or Gemini.

Crypto Regulatory Risk: There is significant uncertainty regarding the regulatory treatment of crypto assets in the U.S.  As a result, many crypto assets are either unregulated or in the early stages of regulation by U.S. federal and state governments and self-regulatory organizations. To the extent that any type of crypto asset is determined to be a security, or other regulated asset where Betterment has not anticipated that treatment, or to the extent that a U.S. or foreign government or quasi-governmental agency exerts additional regulatory authority over crypto assets, Crypto Portfolios may be adversely affected. The effect of any future regulatory change on crypto is impossible to predict, but such change could be substantial and adverse. For example, while Betterment constructs Crypto Portfolios with the objective of excluding crypto assets that specifically have been deemed to be securities by U.S. Congressional statute, final regulatory rulemaking of a U.S. regulator, or pursuant to a final court decision, if a crypto asset held in Crypto Portfolios were deemed to be a security, Betterment would likely sell that crypto asset and no longer include it in the Crypto Portfolios, which could result in transaction costs and taxes and adversely impact the performance of the Crypto Portfolio.

For more information on Crypto Portfolio risks, please review our Form ADV Brochure, specifically Item 8 - Risk of Loss.




1 Marcos Lopez de Prado, 2016. "Building Diversified Portfolios that Outperform Out-of-Sample," Journal of Portfolio Management, Cornell University, Department of Operations Research & Industrial Engineering.