4 ways to invest in cryptocurrency without buying it
What to do if you want to be in the cryptocurrency market, but do not want to buy coins directly? I will tell you in the article what are the ways.
Cryptocurrency ETFs
- Cryptocurrency Exchange Traded Funds (ETFs) are exchange traded investment funds that track the prices of cryptocurrency assets. By purchasing ETFs, you can access changes in the value of cryptocurrencies without the need to manage private keys and store digital wallets.
- Grayscale Bitcoin Trust (GBTC) is one of the well-known cryptocurrency ETFs. With GBTC, you get exposure to the price of bitcoin. For example, if you buy GBTC shares and the price of bitcoin doubles, the value of your GBTC shares will also double.
- Bitwise 10 Crypto Index Fund (BITW) is a fund that invests in the 10 largest cryptocurrencies by market capitalization. The fund buys assets from the Bitwise 10 Crypto Index, excluding Bitcoin.
- Osprey Bitcoin Trust (OBTC) is a fund that invests only in bitcoin. OBTC allows investors to access bitcoin without having to buy it themselves.
Shares of companies related to cryptocurrency
A lot of companies are involved in cryptocurrencies, and investing in their stocks can be a way to gain indirect access to the cryptocurrency market. For example, Square and Tesla shares have a connection to cryptocurrencies and react to changes in bitcoin prices. But there are also other companies that are linked to cryptocurrency:
- Coinbase Global Inc. (COIN) is a company that develops platforms for buying, selling, and storing cryptocurrencies. COIN also provides services for institutional investors.
- MicroStrategy Incorporated (MSTR) is a company that invests in bitcoin as a reserve asset. MSTR also provides data analytics and business intelligence services.
- Riot Blockchain Inc. (RIOT) is a company that mining bitcoin and other cryptocurrencies. RIOT also invests in other cryptocurrency projects and technologies.
Derivatives
Derivatives are financial instruments whose value depends on the price of another asset, called the underlying asset. Derivatives are used to protect against the risks of changes in the value of the underlying asset, as well as for speculative purposes.
Derivatives, such as futures and options, allow you to speculate on changes in the price of virtual coins. With their help, you can make money on the rise or fall in the price of cryptocurrency without actually owning it. Such contracts are also used to protect against fluctuations in the price of cryptocurrency. Examples of derivatives:
- Bitcoin futures on the CME Group exchange
- Contract for difference (CFD) on eToro platform
ICO and STO
Investing in Initial Coin Offerings (ICO) or Security Token Offerings (STO) provides an opportunity to invest in young cryptocurrency projects.
An ICO is a method of attracting investment in a cryptocurrency project where a company issues its own cryptocurrency and sells it to investors. Examples of ICOs: Ethereum, EOS, Tezos.
An example of a successful ICO is Ethereum, which held its ICO in 2014 and raised $18 million. With this funding, the Ethereum team developed a blockchain platform that enables the creation of decentralized applications and smart contracts.
New ICOs can be found on ICO Drops, a service that provides detailed analytics on upcoming and past ICOs.
STO is a method of attracting investment in a cryptocurrency project in which a company issues securities on the blockchain that can be exchanged for shares or a stake in the company. For example, tZERO held its STO in 2018 and raised $134 million. tZERO is a securities trading platform that uses blockchain technology to secure transactions.
By the way, mining can also be indirectly attributed to investing in cryptocurrency without buying it. Of course, this method requires more initial investment, but the potential profit can be greater than buying funds or shares.
