Why would you want to invest in Bitcoin without holding any? The answer to this is a little complicated.
Due to the rising popularity of cryptocurrency, NFTs and blockchain, the masses have now started to take notice. According to a survey conducted in 2021 of around 1700 American adults, 89% of them had heard about Bitcoin and cryptocurrency.
People who typically only invest in traditional investment instruments and assets are also intrigued by the potential of crypto. However, not everyone is fully on board with the idea of holding a cryptocurrency.
The reasons are endless.
Some people still doubt if it’s a pyramid scheme, while others just don’t fully understand the technology.
You may be one of them. You may want crypto in your portfolio but don’t want to expose yourself to the risks. Or you may not want to go through the steep learning curve. So, how do you get the best of both worlds – exposure to cryptocurrency without holding any?
In this guide, we’ll discuss 4 ways to do exactly that.
Bitcoin Futures ETF
There have been many attempts to start a spot Bitcoin ETF. But unfortunately, the U.S. Security and Exchange Commission (SEC) has yet to approve one. Though, in some other countries, like Canada, Spot Bitcoins ETFs have been approved.
But lucky for us, a few companies and organizations found a way to work around the system to allow investors to indirectly invest in cryptocurrencies through ETFs.
Enters Bitcoin Futures ETF.
Instead of tracking the price movements of Bitcoin, these ETFs track the price movements of Bitcoin Futures ETF. Check our in-depth guide on Bitcoin ETF to know all about it.
Bitcoin Futures ETF is one of the best ways to invest in Bitcoin without holding any. It allows people to get exposure to cryptocurrency with an investment instrument they already trust and are familiar with.
ProShares Bitcoin Strategy ETF (BITO) and Valkyrie Bitcoin Strategy ETF (BITO) are the two best options out there right now. For more, check out the list of the 8 best crypto ETFs in the US.
Crypto Trusts & Funds
Crypto trusts and funds, like the Bitwise 10 Crypto Index Fund, Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE), are your next best bet after Bitcoin ETFs to invest in Bitcoin without holding any.
Similar to Bitcoin Futures ETF, they allow you to add crypto to your portfolio using a traditional investment vehicle. One that you’re already familiar with.
Buy Stocks & Shares (of Companies in the Crypto and Blockchain Industry)
What do we mean by companies in the crypto and blockchain industry?
These are companies that either directly hold and trade cryptocurrencies and NFTs, like crypto exchanges, or companies that are utilizing blockchain technology to create something new.
Whether these companies do well is directly predicated on the performance of Bitcoin and the crypto industry as a whole. If cryptocurrency performs well and grows, the companies will grow, and as a result, your portfolio will grow.
This way, even though you’re not directly holding any Bitcoin or other cryptocurrencies, you’re still making money off its performance. It’s the same effect you would have had if you had actually bought Bitcoin.
So, for example, you can buy Coinbase stocks, which is a crypto exchange. Or you can buy Tesla stocks, which hold around 10,500 Bitcoins on its books, roughly valuing over $200 million. Other options are investing in a company that supports Bitcoin mining or startups developing blockchain and crypto-based products.
Buy Bitcoin Derivatives
Buying Bitcoin derivatives is the closest thing to investing in Bitcoin without holding any.
Bitcoin derivatives work essentially the same way as traditional derivatives. It’s a type of contract where people profit from the performance of an underlying asset, which in this case is Bitcoin.
Futures contracts are one of the most popular derivative tools. In a Bitcoin Futures contract, a buyer and seller will agree (on a contract) to make a transaction on a fixed date at a fixed price.
So, even if Bitcoin is trading for more than the agreed price on a Futures contract, the buyer must oblige to the contract terms and complete the transaction, incurring a loss.
The only drawback to this method is you can’t invest in them for the long term. As soon as these futures contracts expire, they become worthless. So, for someone who wants exposure to crypto for their retirement portfolio, this may not be the best option.
Not wanting to deal with the hassle of creating wallets and accounts on exchanges, learning about different cryptocurrencies and the technology behind them is an understandable sentiment, especially for people who are used to more traditional investment methods, like stocks and securities.
However, the fear of missing out on cryptocurrency is real and too strong. Bitcoin’s performance over the last decade speaks for itself. No matter how much people deny it, the crypto economy is continuing to grow and expand into different industries and infrastructures.
Even though these are some effective ways to gain exposure to Bitcoin and cryptocurrencies without going through the hassle, we suggest you explore actually investing in Bitcoin. There are safe and easy ways that exist which can get you started with investing in cryptocurrencies.