How to invest in cryptocurrencies (without buying any cryptocurrencies)
How to invest in cryptocurrencies without buying cryptocurrencies, sounds like an oxymoron and that is precisely why we thought it should be a topic of a blog.
Indians have been one of the largest purchasers of cryptocurrencies. To directly invest in cryptocurrencies, you need to open an account with a crypto exchange and have a crypto wallet to store your cryptocurrencies. Also, you need to have a thorough understanding of how cryptocurrencies work and the cryptocurrency you are investing in. Very soon you would also need to pay a high tax bill on your gains and on any transactions you make. However, the interesting thing is that you do not necessarily need to buy cryptocurrencies to invest in cryptocurrencies. The US markets provide ways to get indirect exposure to the world of cryptocurrencies. Let us see how.
Invest in cryptocurrencies by buying stocks of companies that have exposure to cryptocurrencies
The first way you can get into cryptocurrency investment without buying any cryptocurrency is to invest in publicly traded companies that have exposure to cryptocurrencies. Such companies are of three types:
- Companies that help retail investors to buy/sell crypto: These are companies like Coinbase and Robinhood that let retail investors in the US buy/sell cryptocurrencies.
- Companies that hold cryptocurrencies in their treasury holdings: These companies have a significant holding of crypto, but generate revenue from other sources as well. Two public companies Tesla and Microstrategy hold almost 78% of Bitcoin owned by publicly traded companies.
- Companies that mine cryptocurrencies: These would be publicly traded companies that mine cryptocurrencies like Bitfarm Ltd. and Hut 8 Mining Corp.
You can easily invest in such companies through the Vested platform. What’s more, you can buy fractional shares of these companies for as little as $1. (You can find out how to invest in US stocks from India here).
Invest in cryptocurrencies through ETFs listed in the US markets
However, for the beginner investor, it may not be possible to make informed decisions to invest in individual stocks. Here is where ETFs or Exchange Traded Funds come in. ETFs let you diversify your portfolio, rather than bear the risk of investing in individual stocks.
There are two types of ETFs in this space. First, there are blockchain ETFs that track the prices of companies that are either developing or using blockchain technology. An example is the BLOK ETF or the Amplify Transformational Data Sharing ETF, which invests in companies involved in the blockchain and crypto ecosystem. It has companies like Coinbase Global Inc., Nvidia Corporation, SBI Holdings Inc, and Hut 8 Mining Corp. among its top holdings.
Second, there are crypto ETFs (Or Bitcoin ETFs) that propose to track the price of Bitcoin (BTC). An example is the ProShares Bitcoin Strategy ETF (BITO). The fund has a managed exposure to Bitcoin futures contracts and is 98% correlated to the price of BTC. (Learn more about it here).
Invest in cryptocurrencies via Vests available on Vested
You can now also invest in cryptocurrencies (Bitcoins) through the Bitcoin Vest that is available on Vested. The Vest combines companies in the categories mentioned above. It also has a small allocation of ProShares Trust – ProShares Bitcoin Strategy ETF.
As we have seen, there are ways to invest in cryptocurrencies without actually purchasing any coins. However, it is important to understand the risks associated and do proper due diligence as you would do with any other investment.