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CRYPTO 101: Investing in Bitcoin without actually buying it

8 min reading

Bitcoin's popularity seems to be growing rapidly and more people are starting to invest in it without actually purchasing it. lets see how it is possible shall we?


Bitcoin, the world's largest cryptocurrency, seems to be everywhere these days. From fast food to sports to the local Walmart, it finds its place in the mass flow. As an investment, his spectacular rally that year excited his followers and piqued the curiosity of the uninitiated. In 2021 alone, the price of Bitcoin has more than doubled. Is it time to invest yourself?

The easiest way to bet on Bitcoin is, of course, by buying it. But there are many reasons why you might not want to take this direct route. You may not know Bitcoin and want to get involved, but you would prefer to know more traditional types of investments. Or maybe you know a lot about Bitcoin’s value and don't want to touch it, watch out for seemingly random price fluctuations. Or you already own Bitcoin and want to invest more in the future of cryptocurrencies. The good news is that there are more options than ever for American investors to gain exposure.

Here is a brief description of the alternatives:

  • ETF

ETF: While exchange-traded funds that track the price of Bitcoin have been available for some time in countries like Canada and Europe, it's a different story in the United States, where they have long been blocked by regulators. That changed in October when the first Bitcoin ETF hit the market. Importantly, this product invests in bitcoin futures, which indirectly track the spot price of bitcoin through the use of contracts monitored by the Chicago Board of Trade. (The Securities and Exchange Commission claims this version offers more investor protection than a typical Bitcoin ETF.) So far, two have been released: (BITO) and (BTF).

Each cost $9.50 for every $1,000 you invest and includes complex futures worlds, which are tools traders use to bet on price movements. But these funds can be ideal for those who are new to the world of bitcoin or who are hoping to consolidate their holdings on traditional brokerage accounts that actual cryptocurrency don't allow.

Some publishers, such as Direxion Investments and Valkyrie Investments, are trying to create a leveraged Bitcoin futures fund that allows investors to place large bets on the Bitcoin price going up or down. Both withdrew their statements from the SEC this week, possibly following signals from US regulators that Bloomberg Intelligence said they were unlikely to be approved. But you should pay attention to this in the future. The ETF industry also expects funds to actually house Bitcoin – more than a dozen issuers are interested in bringing the product to market – but the SEC's reluctance means the odds are still far away.

Buy traditional Bitcoin-related shares in the company. Companies have structures that the average investor might be more familiar with, such as an executive team that makes decisions and financial results that must be disclosed. This is one of the reasons why some people prefer this way of dealing with Bitcoin indirectly. "It will be easier for people to enter an industry that already understands and applies this technology more efficiently," said Sveta Bhargav, Philadelphia Chief Financial Advisor. "This could be a better starting point for investors."

Coinbase Global Inc. is a great example. Since most of its revenue comes from fees charged to users for depositing and trading funds, the valuation of cryptocurrencies fluctuates greatly with the price of Bitcoin. In SEC documentation, the company states: “Our net sales are highly dependent on the prices of crypto assets and the volume of transactions made on our platform. Alternatively, investors can focus on Bitcoin-oriented companies and have significant stakes. Tesla Inc. has approximately $1.26 billion in “digital assets” according to its most recent annual financial report.

Other publicly traded companies with significant holdings include MicroStrategy Inc., an enterprise software company that owned 114,042 bitcoin units at the end of September; and Galaxy Digital Holdings Ltd. with hundreds of millions. For companies doing anything other than holding Bitcoin, you also need to evaluate the performance of their sector and their respective products. Stock performance is affected by a number of factors faced by each company, not just the price of Bitcoin.

"The risk/return profile isn't exactly the same because you're positioning yourself at the company and dealing with their unique risks," said Michael Kelly of Switchback Financial in Madison, Connecticut. So far, Tesla has grown by 73%, MicroStrategy by 105% and Galaxy Digital by more than 200%.

Equity ETFs: To invest in multiple companies at once, there are multiple exchange-traded funds that hold shares of companies involved in the Bitcoin ecosystem. The Bitwise Crypto Industry Innovators ETF (BITQ), for example, lists Galaxy Digital, Coinbase, and MicroStrategy as its largest holdings. It costs $8.50 for every $1000 you invest. The Amplify Transformational Data Sharing (BLOK) fund serves the same purpose, while the Viridi Cleaner Energy Crypto-Mining & Semiconductor ETF (RIGZ) offers a touch of ESG. What's more, this week Valkyrie filed paperwork to set up an actively managed fund that will be invested in bitcoin mining operations.

Invest in technology: Bitcoin is a digital currency: each unit is an encrypted record of data stored in a public ledger called a blockchain, as you probably already know. (And if not, check this out.) By solving complex math problems to verify currency transactions, people can be "rewarded" with new bitcoins. This opens the door for companies that dig into Bitcoin and use powerful computers to create digital currency units from scratch. "You don't have to be a computer freak to do this," said Julius de Kempenaer, senior technical analyst at "There are companies out there that can do it for you."

Marathon Digital Holdings Inc. and Riot Blockchain Inc. are two of the largest companies in the industry. On the Marathon website, the Las Vegas company states that owning stocks "helps you deal with Bitcoin in your portfolio without dealing with the complications of holding assets directly." Colorado Riot, headquartered in Castle Rock, Colorado Riot, specializes in acquiring cryptocurrency businesses: In April, the company announced that it had entered North America's largest bitcoin mining facility, Whinstone US, in a $651 cash-and-share purchase deal million.

Old school trust: Before futures-based ETFs debuted, trusts were the main place to get interest rate exposure in Bitcoin. The most well-known is the Grayscale Bitcoin Trust, which was founded in 2013 by Grayscale Investments, an American crypto investment firm. The downside is that Grayscale charges a 2% fee to manage the fund. "There are more costs associated with that. When you own bitcoins outright, you don't pay the fees to keep them or the trading fees to make people work," said Ryan Cole, personal wealth advisor at Citrine Capital, San•based wealth management firm. in Francisco. In addition, the funds are sometimes traded at a discounted price according to the value of the bitcoins they hold.

However, the company has filed documents to convert the trust into an ETF. This will help solve the discount problem thanks to a feature in the form of an ETF that allows launching and exchanging units and keeping prices at the level of securities tracked by the fund. The conversion permit is still waiting for the green light from the SEC.

Then there's always AltCoin. There is also the option to purchase one of the many alternative coins or altcoins for a short term. Litecoin, which was founded in 2011, is up 60% this year, compared to around 110% for Bitcoin. Ethereum, the second largest digital currency, is up 510% over the same period. Dogecoin and Shiba Inu have been causing quite a stir lately, but the main reason someone would invest in one of these "mecoecoins" is unclear. However, this year they have grown exponentially.

Or just buy bitcoin: It used to be much more difficult to own a piece of Bitcoin - either the whole coin or part of it. That has an unlock wallet, tracking keys, and often means working with new companies without calling file or head office. Now, several companies – including exchanges like Coinbase, money transfer apps like CashApp, and brokers like Robinhood – have made it easier to buy Bitcoin and other cryptocurrencies, although fees and policies vary.

One of the newest is Venmo, which allows customers to buy, sell, and store cryptocurrencies such as Bitcoin and Ethereum. There is even an option for credit card holders to automatically purchase cryptocurrency from their Venmo account with the money they earned from the purchase. One of the newest is Venmo, which allows customers to buy, sell, and store cryptocurrencies such as Bitcoin and Ethereum. There is even an option for credit card holders to automatically purchase cryptocurrency from their Venmo account with the money they earned from the purchase.

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