6 Ways to Invest in Crypto Without Buying Bitcoin
If you are interested in investing in cryptocurrency, you might be a little uncertain about where to start. While you might try buying different cryptocurrencies, the markets are highly volatile, and choosing alternatives with less risk might be a better option.
Fortunately, there are ways to explore the crypto world using familiar investment tools without buying coins. This article will discuss the six best ways to invest in crypto without buying Bitcoin.
What Is Indirect Investing in Crypto?
For most people, investing in cryptocurrencies starts by buying them directly on a crypto exchange. However, there are ways to indirectly invest in crypto through regular financial products like stocks, mutual funds, or exchange-traded funds (ETFs). This way, investors can still get involved in the crypto world without jumping in directly.
When choosing the best indirect way of investing in crypto, you must consider various factors. The investment’s security, the fees charged, and the risk of losing your money are some things to keep in mind. Like any other investment, only put in as much as you are willing to lose.
Below are six of the best ways to invest in crypto indirectly.
1. Investing in Bitcoin Stocks
Investors interested in cryptocurrency stocks can either invest in blockchain companies or those directly holding cryptocurrencies by buying their shares.
Blockchain companies are involved in activities like crypto mining and software development. Canaan (CAN), HIVE Blockchain Technologies (HIVE), and Riot Blockchain (RIOT) are some examples of such companies giving you indirect exposure to crypto investing. Besides, some companies, such as Coinbase, hold cryptocurrencies directly.
However, you need to know the risk attached to these stocks. The value of the company shares will rise and fall in response to the crypto markets’ volatility.
2. Invest in Bitcoin ETFs
If you want an easy way to get into crypto, think of an exchange-traded fund (ETF) that holds Bitcoin. ETFs are financial products that track the price of an underlying asset, which could either be a single asset, like gold, or a mix of assets, like an index of stocks.
The Securities and Exchange Commission (SEC) has given the green light for ETFs that directly hold Bitcoin, which is a piece of good news for the fund industry. Investors can also choose ETFs with futures contracts linked to Bitcoin’s price.
You can buy and sell these ETFs through a regular stock-market account, making them accessible to crypto newbies.
However, since ETFs are like mutual funds, they come with a management fee. The ProShares Bitcoin Strategy ETF, the most popular one, charges 0.95% of what you invest each year. To give you an idea, regular stock ETFs usually charge less than 0.1%. Also, ETFs with futures contracts might not always match the returns of the asset they’re targeting.
3. Invest in Crypto Trusts and Closed-End Funds
Closed-end funds or trusts are another popular option for risk-averse cryptocurrency investors. One popular choice is Grayscale Bitcoin Trust (GBTC). It follows the price of Bitcoin and is available through most investment accounts.
However, trusts like GBTC often cost more than other options like ETFs. Plus, their prices might not always match the actual values of their cryptocurrencies.
GBTC’s shares trade at a lower price than Bitcoin, and it charges a 2% fee for buying Bitcoin and keeping it in a wallet with your name on it. GBTC also offers other crypto-related investments and funds, like the Osprey Bitcoin Trust.
4. Invest in Crypto Separately Managed Accounts (SMAs)
If you’re a more experienced investor and want a mix of control and professional help, think about a separately managed account (SMA). It’s a unique portfolio made just for you and operated by a financial advisor teaming up with investment firms.
SMAs work a bit like mutual funds. A money expert makes the investment decisions and trades for you. However, you can tell the manager to avoid a coin you don’t like or limit how much gets invested. In SMAs, you own the coins, not just shares of a mutual fund.
Still, all this personal attention might cost you. Many SMA firms want you to invest at least $25,000 to start. Also, fees can be a bit high, up to 2%—double what you’d pay for a similar exchange-traded fund.
Also read:
- Safety Tips for Investing in Cryptocurrencies
- Exploring the Role of Cryptocurrency in eCommerce
- What is Market Capitalization in Cryptocurrency
5. Invest in Crypto IRAs and 401ks
If you’re building your retirement fund, you can mix some crypto into your 401(k). It’s a good idea for investors who want to stash money for retirement and play the long game.
You must first ensure that your employer has no issues with you saving crypto in your retirement fund. Then, you can set aside some of your monthly pay in Bitcoin or any other crypto you like.
In the U.S., a company called Fidelity lets customers do this. They will buy the crypto for you and keep it safe in an account just for digital money.
Another option is for you to invest in crypto IRAs. They’re like 401(k)s, but you don’t need your office’s permission. Just move your 401(k) to an IRA and use it to invest in any crypto you want. Lots of these crypto IRAs give you different choices. The best part of an IRA is that it lets you invest and trade cryptos on their platform.
6. Investing in Bitcoin Mining
You can try mining cryptocurrencies on your own if you are unsure about investing in other companies. But beware, especially when mining Bitcoin; it has already become more complicated over time.
You’ll need powerful mining computers called ASICs to set up a Bitcoin mining rig. Here, you’re not buying the coins; you’re playing the role of a miner and getting rewarded with cryptocurrency.
Then, you can keep these digital coins as an investment until you’re ready to trade them for cash or something else. Just remember, you’ve got to manage these assets yourself, using your wallet to keep them safe.
Final Word
Exploring cryptocurrency can be simpler by using familiar investments like stocks or funds. Various platforms offer user-friendly options. Since rules and the market can change quickly in crypto, it’s wise to spread out your investments.
If unsure, talking to a financial expert about your plan is a good idea. And it’s wise to start with a small percentage of your savings and stay informed about the market.
