Investing in cryptocurrency doesn’t mean you have to buy Bitcoin or any other currency.
In fact, many great crypto investment opportunities don’t require you to buy crypto at all. There are also some great advantages to investing in crypto this way.
Here’s why you should consider investing in cryptocurrency without buying crypto and three ways you can do it.
Why Invest in Crypto Without Holding Crypto?
One of the defining characteristics of crypto (certainly at the moment) is volatility. The rise of Bitcoin and other cryptocurrencies might have been rapid, but it hasn’t been without major ups and downs.
In normal circumstances, if you held an asset that was worth $50,000 in early May and it dropped to below $32,000 by mid- to late July, your heart would be in your mouth. That’s exactly what happened with Bitcoin in 2021, though, and it’s part and parcel of holding crypto.
For many investors, this just isn’t a risk they want to take.
If we take the macro trend of Bitcoin, it’s been a fast ascent, so surely there are ways of minimizing the risks and investing in cryptocurrency without having to buy and sell crypto?
There are different ways you can do this, and if you already have a diverse investment portfolio, then the chances are you might already be exposed to crypto in some way. If you hold shares in a company like Tesla, for example, which itself holds crypto, then in some way, you’re already invested.
Naturally, the entire fortunes of a company like Tesla aren’t dictated by the price of Bitcoin, so in this scenario, you are reducing your risk while still getting some limited exposure to Bitcoin.
This was the path personal finance expert Suze Orman took. Noticing that cloud computing firm MicroStrategy held much of its working capital in Bitcoin, she bought up stock, expecting that if the price of Bitcoin increased, then so would her investment.
While this worked for Orman, placing all your investment dollars in one company that’s extremely exposed to Bitcoin fluctuations isn’t everyone’s idea of an ideal investment. There are other ways you can invest in cryptocurrency without having to buy any crypto, though.
Invest in the Infrastructure and Technology Behind Cryptocurrency
Cryptocurrencies aren’t easy to understand, and this is something that puts many people off buying and selling the currency itself.
There’s lots of infrastructure (for example, Blockquarry’s BLOQPODs and BLOQ PARKS) that backs up Bitcoin and other cryptocurrencies. Two key elements are blockchain and mining. Both of these involve complex processes that are still being perfected.
It’s important to remember that cryptocurrency is in its infancy, and advances are being made at pace.
This is particularly true in the technology and infrastructure that support crypto. Some of the companies that are pioneering advances are publicly traded, which means you can invest in them and gain some exposure to crypto.
One of the most talked-about aspects of cryptocurrency is its environmental impact – it uses a massive amount of energy. Behind the scenes, there are innovative companies that are working to solve these problems.
While bad publicity surrounding Bitcoin’s environmental impact causes short-term dips in its value, those companies that are making crypto greener are less likely to be affected. By investing in publicly traded Bitcoin mining companies, you can benefit from the long-term rise in Bitcoin without taking such a hit if there are short-term dips.
Likewise, blockchain technology has wide-ranging uses that stretch beyond cryptocurrency. Companies that are invested in blockchain are exposed to cryptocurrency fluctuations to some extent, but not in the same way as they would be if they were holding Bitcoin.
With many different businesses working in different areas related to cryptocurrency, there are plenty of ways to gain light exposure to crypto without being tied into the day-to-day fluctuations of crypto value.
Invest in Mutual Funds/ETFs with Companies with Interests in Crypto
We all know the importance of diversifying your portfolio to minimize risk. When you’re investing in crypto – a naturally volatile asset – this becomes even more important.
One of the ways you can diversify while still investing in cryptocurrency is through mutual funds and ETFs that include companies with crypto interests. Most investment platforms offer access to index and mutual funds, and you can use the search function to find funds with your target companies.
For example, if you wanted to invest in Coinbase, a publicly traded cryptocurrency exchange, then you’d search your investment platform for funds that include (COIN), which is Coinbase’s ticker symbol.
Many of these funds are specialized, meaning they focus on certain industries and certain types of companies. If you get a feel for the kind of crypto-related companies you’d like to invest in, then you will be able to find mutual funds that closely match this.
This is a good way to invest in crypto and still use diversification to limit your risk. While Bitcoin and other cryptocurrencies are volatile and will affect related businesses, not all of them are going to go up and down purely on the price of Bitcoin.
Specialized mutual funds can be expensive to buy into versus total market indexes, though, so this is something to be aware of. Investing in crypto is tricky enough without having to think about 1% fees, so do your homework and make sure you’re choosing the right funds.
Invest in Blockchain ETFs
Bitcoin and cryptocurrencies split opinion. You don’t have to search too hard to find an influential figure bringing the value of crypto into question.
For anyone with exposure to crypto, this is always going to be a consideration. There are question marks about the future of cryptocurrency in society and nobody can give definitive answers.
If you’re one of those people who doesn’t see cryptocurrencies lasting the course, then there are still options for you when it comes to investing in crypto. It’s eminently possible to have doubts about crypto’s value but to see the technology behind it as incredibly important.
Blockchain is far more than just crypto, and it has the potential to disrupt numerous industries in the future. If you’re invested in a blockchain ETF, then you’re invested in a technology that’s in its infancy and has wide-ranging uses.
If crypto continues to fly, then your investment is going to benefit, but if it finally crashes and burns in spectacular fashion, your ETF isn’t going to go the same way. Yes, it will have an effect, but you will have some protection.
Again, popular brokerages will offer different blockchain ETF options, so make sure to scope them out and see whether they are the right option for you.
Things to Remember When Investing in Crypto Without Buying Crypto
The key thing to remember when investing in crypto, even if indirectly, is that this is a volatile asset. The fluctuations in the value of Bitcoin are evident, but it runs deeper than this.
Whether it’s crypto mining, blockchain, or other technology, these are industries in their infancy, and we’re still waiting to see how they will play out.
Every investment comes with risk, and these investments are generally classed as speculative.
The great thing is, if you understand the risks and are willing to accept them, then there’s huge potential in investing in cryptocurrency through these methods. We’re always reminded that Bitcoin started 2019 around $9,300 before smashing through $50,000 in 2021, but alternative crypto investments have also seen large growth.
The BLOK (Amplify Transformational Data Sharing ETF) blockchain ETF, for example, had a market value of $14.77 going into 2019 and surpassed $60 in 2021.
This goes to show that there are plenty of ways to invest in crypto without actually having to hold cryptocurrencies. For investors who are interested in the infrastructure and technology behind cryptocurrencies but aren’t sold on the currencies themselves, this is an excellent option.
The future of cryptocurrencies such as Bitcoin are undecided, and they certainly face challenges. For investors, this is an opportunity, but clearly it doesn’t come without risk.
However, by diversifying your investments and choosing the right elements of cryptocurrency to invest in, you can manage that risk and grow your investment.
Conclusion: Investing in Cryptocurrency Without Holding Crypto
Cryptocurrencies present plenty of investment opportunities.
For people who are experienced in traditional financial investments, holding cryptocurrency might not be the most attractive option, and instead, buying stocks in companies that are involved in crypto or buying into ETFs with a focus on crypto and blockchain might be a better option.
If you choose to go this route, then it can offer many of the positives of investing in crypto without the same levels of volatility. This is a young and growing industry, with innovative companies to back, so there’s plenty of room for financial reward without having to hold crypto.
For people who are looking to invest in crypto, it’s always worth exploring your options and looking beyond just holding currency.