If you’re looking to invest in cryptocurrencies, you can purchase bitcoins, Ethereum, or other altcoins. However, there are indirect ways of investing in the crypto world, which may be cheaper and less risky. Here’s what you need to know if you want to invest in crypto without buying crypto.
Key Takeaways
- Cryptocurrency is a relatively new investment with its own risks.
- Investing directly in cryptocurrencies can be challenging because of their volatility, and some investors prefer using more traditional investment vehicles.
- You can indirectly invest in crypto through funds and cryptocurrency-related stocks.
What Is Indirect Crypto Investing?
If you don’t want to open an account on a crypto exchange and buy cryptocurrencies, you have options. You can invest in cryptocurrency indirectly through traditional methods like stocks, mutual funds, and exchange-traded funds (ETFs), thereby gaining exposure to cryptocurrency.
There are pros and cons to consider, including security, fees, and the risk of losses. When you buy cryptocurrency through third parties, they are going to make money somehow, so you should consider any additional costs when deciding whether to buy crypto using an indirect method.
Here are some ways you can invest in cryptoindirectly.
Crypto ETFs
When trying to get broad access to a particular asset class, the first port of call is usually an ETF. ETFs can be found that track pretty much everything, from gold to the S&P 500. Unfortunately, with cryptocurrency, it’s a little more complicated.
After many years denying spot cryptocurrency ETF applications, the Securities and Exchange Commission approved the first 11 in January 2024. Previously, the regulator only gave the green light to ETFs that owned bitcoin futures contracts. Some examples of Bitcoin Futures ETFs include:
- ProShares Bitcoin Strategy ETF (BITO)
- Valkyrie Bitcoin Strategy ETF (BTF)
- VanEck Bitcoin Strategy ETF (XBTF)
- Global X Blockchain & Bitcoin Strategy ETF (BITS)
The first Bitcoin Spot ETFs to gain approval were:
- ARK 21shares Bitcoin ETF (ARKB)
- Bitwise Bitcoin Trust (BITB)
- Fidelity Wise Origin Bitcoin Fund (FBTC)
- Franklin Bitcoin ETF (EZBC)
- Grayscale Bitcoin Trust (GBTC)
- Hashdex Bitcoin ETF (DEFI)
- Invesco Galaxy Bitcoin ETF (BTCO)
- Ishares Bitcoin Trust (IBIT)
- Valkyrie Bitcoin Fund (BRRR)
- Vaneck Bitcoin Trust (HODL)
- Wisdomtree Bitcoin Fund (BTCW)
There are catches to investing in crypto this way. First, futures contracts and ETF shares don’t necessarily deliver the same returns as their target assets. Second, ETFs for complex and niche products, such as those related to crypto, can have fees that eat into your potential returns.
Fees and underlying investments vary based on which fund you choose, so be sure to read the prospectus carefully to know what you’re getting.
Cryptocurrency and Blockchain Stocks
If you want to buy a stock that exposes you to crypto, you can choose among companies that work in blockchain and those that invest in or hold cryptocurrency on their balance sheets.
Companies specializing in blockchain technology are often involved in crypto mining, software development, and other blockchain-based services. Notable stocks include Riot Blockchain (RIOT), Canaan (CAN), HIVE Blockchain Technologies (HIVE), and Bitfarms (BITF). These companies have different risk and reward tradeoffs than those directly invested in cryptocurrencies, often highlighting a diversified set of offerings within the wider crypto sector.
Alternatively, some companies hold cryptocurrencies directly. Coinbase (COIN) is one of the largest and most recognized publicly traded cryptocurrency exchanges.
Generally, when there is a downtrend in crypto prices, the related stocks also struggle. This volatility is just one of the risks inherent in this sector, a key point to remember when exposing your portfolio to crypto-related products. Given the rapid changes in cryptocurrency regulations and market moves, it's prudent to consider diversifying your portfolio to guard against risk and consult a trusted financial professional if you have any doubts about your investment plans.
There are also ETFs that specifically invest in companies with links to cryptocurrencies.
Crypto and Your 401(k)
You may be able to invest a part of your retirement funds in cryptocurrencies with minimal effort. In 2022, Fidelity announced that clients could add bitcoin to their 401(k) accounts. Fidelity buys the coins on their behalf and holds them in a digital assets account.
This move is a major step toward bringing cryptocurrencies fully within the mainstream through traditional retirement investment portfolios. The option may be available for you, though it’s up to your employer to decide.
Credit Card Rewards
Credit card rewards are one final method to fill your cryptocurrency portfolio without opening your fiat wallet. Several cards allow you to earn crypto when you swipe, tap, dip, click, or do anything else to use a credit card for payment.
Examples of cryptocurrency credit cards include the BlockFi Rewards Visa Signature card, Gemini Credit Card, and Upgrade Bitcoin Rewards Visa card. The Crypto.com exchange and Coinbase also feature a rewards card offering.
Some cards, like the Venmo credit card, offer flexible redemption options, including cryptocurrency. When you earn crypto as a credit card reward, you invest in crypto without buying crypto. Even if it goes down in value, you didn’t pay for the crypto, so everything you earn is like any other credit card points system.
What Is Cryptocurrency?
A cryptocurrency is a digital currency created using cryptographic techniques that enable people to buy, sell, or trade them securely while controlling the creation of new units. Unlike fiat currencies, a cryptocurrency is not controlled or maintained by any central authority, such as a central bank.
How Can Beginners Start Investing in Cryptocurrency?
Knowing how to invest in crypto can be intimidating, given the complexity of blockchain technology, the hype surrounding it, and the many available currencies. The first step is to get up to speed on the fundamentals of cryptocurrencies, how blockchain technology underpins them, the kind of crypto wallet you will need, and the differences among cryptocurrencies like bitcoin, ether, and altcoins. Reputable resources such as Investopedia and courses offered by universities—many freely available online—can be invaluable. Platforms like Coinbase or Binance might be a good choice for your initial steps into the market since they have accessible interfaces and resources to guide you. Once in, stay updated on crypto news and regulatory developments.
How Can I Get Crypto Without Spending Money?
A few companies offer crypto in exchange for a service, such as referring someone to a program, completing a survey,completing captcha puzzles, or watching advertisem*nts. A handful of credit cards also reward spending with cryptocurrency.
The Bottom Line
Investing in cryptocurrency directly requires getting set up on an exchange and finding ways to store your digital coins safely. It can also mean potentially having a lot of money tied up in just one very volatile asset.
Fortunately, there are alternatives. You can invest in cryptocurrencies indirectly through ETFs that own future contracts tied to currency prices, bitcoin ETFs that securitize bitcoin holdings, or by purchasing shares in companies involved in cryptocurrency mining, software development, and other services. Alternatively, you can consider a credit card with cryptocurrency rewards or see if your employer offers this asset class through your 401(k).
The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read ourwarranty and liability disclaimerfor more info. As of the date this article was written, the author does not own cryptocurrency.
