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Bitcoin has enjoyed tremendous growth over the past decade, skyrocketing in price and even gaining support from major banks.
However, for many retail investors, it can be a complicated investment – it is historically expensive, volatile, cannot be purchased through a brokerage account and is not guaranteed by a financial institution.
“There are things you can do to have indirect exposure,” said Tyrone Ross, investment advisor and CEO at Onramp Invest, a digital investment platform. “If people do that, I think it’s better and safer before they really start to delve into the [bitcoin] rabbit hole.”
There are a few ways in which people can invest in cryptocurrency and even bitcoin, or the technology behind it, without holding a single coin. While it may not completely protect investors from the volatility of the cryptocurrency’s trademark, it can give them some protection against losses.
Invest in companies that have bitcoin or another cryptocurrency
One way to get exposure to bitcoin without stopping it is to invest in the shares of companies that have cryptocurrency-related services or that have currencies, Ross said.
This includes a broad group of publicly traded companies in different sectors that have added bitcoin to their balance sheets or have cryptocurrency storage or payment services.
Recently, companies like Tesla and MicroStrategy have invested directly in bitcoin. Tesla bought $ 1.5 billion in bitcoins and said it would soon accept digital currency as a form of payment. MicroStrategy, an enterprise software company, said it plans to sell $ 600 million in convertible debt and use the product to buy bitcoin.
See companies with technology related to bitcoin or blockchain
Another way for investors to gain exposure to cryptocurrency is by investing in publicly traded companies that have technology related to currency trading or use blockchain, the technology on which bitcoin is built.
Experts also highlighted companies like Square and Paypal, which allow users to trade cryptocurrencies on their platforms. In addition, companies like Riot Blockchain and Galaxy Digital focus on cryptocurrency and the underlying technology. And big tech names like Microsoft, IBM, Google, SAP and Amazon use blockchain in different parts of their business.
There is also underlying hardware that people can invest in to gain exposure to cryptography without holding coins.
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“One can also buy companies that make graphics processing units (GPUs) necessary for computers to solve the mathematical equations of blockchain technology,” said Anjali Jariwala, certified financial planner, CPA and founder of FIT Advisors in Torrance, California.
Investing in company stocks is much easier and probably safer than investing in a cryptocurrency. On the one hand, this can be done through a normal brokerage account maintained by a financial institution, giving the user additional security and ease of use. For example, if you forget your broker account password, you can reset it – not so if you forget your bitcoin wallet key.
Still, it may not eliminate volatility, said Jariwala.
Check out a cryptocurrency fund
It is also possible to invest in funds that hold bitcoin and other cryptocurrencies, according to Doug Boneparth, CFP and president of Bone Fide Wealth in New York.
There are currently a few players who are creating bitcoin funds, he said, pointing to companies like Grayscale and Osprey, which help retail investors navigate the cryptocurrency.
“Buying it in a bottom pack is probably more familiar to the retail investor than anything else,” he said. In addition, working with a fund means that you will negotiate with the company that manages the fund any questions or account information you need, such as setting a password, tracking profit and loss or collecting documents to complete your taxes.
Of course, these services come at a cost – different funds will have different fees associated with them, which people should research before investing money in them, said Bonaparte.
Most people should spend more time learning than buying.
And people can also invest in funds that have exposure to cryptocurrencies and blockchain technology, such as the Ark Next Generation Internet exchange-traded fund, for example. The ETF has exposure to things like artificial intelligence, big data, cloud computing and blockchain.
Certainly, some investors will still want to have digital currencies on their own. More than a quarter of Americans plan to invest in cryptocurrency this year, according to a February survey of more than 30,000 people conducted by Piplsay Research. In addition, half said they believe investing in cryptocurrencies is safe, according to the report.
If you want to invest directly in bitcoin or another cryptocurrency, experts recommend learning as much as possible first, investing only an amount that you feel comfortable losing and holding for the long term.
“Most people should spend more time learning than buying,” said Ross, referring to the cryptocurrency.
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Disclosure: NBCUniversal and Comcast Ventures are investors in Nuts.