In the world of investing, the rise of crypto has generated a lot of buzz. But due to their volatile nature, these new assets present risks and opportunities. While purchasing tokens, such as BTC or ETH, might seem like the simplest way to invest in crypto, there are other ways. If you want to know how to invest in crypto without buying any, keep reading. Because this article is about indirect crypto investments.
What are indirect crypto investments?
Indirect crypto investing is investing without actually purchasing and holding crypto. Instead, the investor pumps their money into businesses or funds that have a stake in crypto.
One example of this type of investment is Exchange-Traded Funds (ETFs). Those who invest in ETFs are investing in firms that specialize in crypto mining or crypto-related businesses. Another route is buying stock in a publicly traded company that works in the crypto industry. For instance, you could buy into Square or MicroStrategy. Both of these firms have significant Bitcoin investments.
The risks and complexities of directly owning and managing crypto are well known. Indirect crypto investing, therefore, works better for investors looking to get exposure to the potential upside of the crypto market while reducing the risk exposure.
Mutual funds and crypto ETFs: Two key indirect crypto investments
Investment products such as crypto mutual funds and ETFs enable investors to gain exposure to the crypto market without having to purchase and hold any crypto. They help diversify investor portfolios and lower some of the risks. Both products thus give investors a way to safely access the potential upside of the crypto market.
An ETF that invests in a variety of cryptos is known as a crypto ETF. Like a stock, it can be bought and sold daily and traded on a stock exchange. Without having to buy and manage individual cryptos, crypto ETF investors gain access to a diversified portfolio. This investment product is also a desirable option if you’re concerned about costs. Because they typically have lower fees than actively managed mutual funds.
A mutual fund for crypto is a professionally managed investment vehicle. It pools the funds of many investors to buy a variety of cryptos. With mutual funds, the fund company/manager purchases and sells them. This is unlikely in ETFs, which are traded on an exchange. Because mutual funds require more management and research than ETFs, their fees tend to be higher.
Blockchain and crypto stocks
Stocks of crypto and blockchain businesses are known as blockchain and crypto stocks. These stocks offer investors a way to gain exposure to the growing crypto and blockchain markets without having to directly own any crypto. In other words, they are great indirect crypto investments.
Crypto companies might be crypto exchanges, mining firms, or service providers for the crypto industry, like wallet providers and payment processors. Businesses in the blockchain industry also offer infrastructure and solutions related to the technology. Some examples of the latter include blockchain platforms and software companies.
Bonus guidance: Credit card benefits
Many credit card companies offer users crypto rewards as an additional perk. These credit cards give out bonuses just to encourage users to buy crypto. This is the last indirect crypto investment we will discuss.
Review the terms and conditions of your card carefully. Determine whether you qualify for the benefit if you’re interested in receiving rewards for your crypto purchases. While some credit cards may exclude crypto purchases from earning rewards, others may offer higher reward rates.
While there are potential rewards to investing in cryptos, such as high returns, there are also significant risks involved. Volatility, security risks, and regulatory uncertainty are some of the most important. As with any investment, it’s important to carefully evaluate your investment goals, risk tolerance, and personal circumstances before making a purchase. Also, always do your research.
1. What is crypto?
Cryptos rely on cryptography to secure and verify transactions and regulate the creation of new units. Users can transfer crypto directly without a middleman financial institution, such as a central bank.
2. What is Bitcoin?
A mysterious individual or group created the digital currency known as Bitcoin in 2009. The individual/group went by the alias “Satoshi Nakamoto.” As a decentralized currency, Bitcoin does not rely on a single administrator or central bank. The currency is thus run and maintained by a network of computers and users.
Bitcoin transactions are recorded on a public ledger known as the blockchain and verified using cryptography. This enables the transaction process to be transparent and secure while preventing fraud and offering protection.
3. Who is Satoshi Nakamoto?
Satoshi Nakamoto is the moniker adopted by Bitcoin’s anonymous creator or creators. It is still unclear whether the name refers to a single person or a collective.
Bitcoin and Satoshi Nakamoto were first mentioned in a 2008 research paper outlining a decentralized digital currency system.