With more than 560 million crypto users globally, there’s a lot of excitement surrounding the potential growth of the industry. Besides, there’s increasing evidence that the market is maturing, with institutions increasingly recognizing the value of this asset class. The industry has come a long way since Bitcoin’s introduction in 2009, with the asset evolving from a currency that many initially viewed with skepticism into a $2.23 trillion asset sought after by renowned institutional investors.
Now more than ever, crypto seems like the perfect opportunity for people to participate in the next frontier of finance. Whether you’re seeking exposure to innovative technology, diversification, or long-term growth potential, owning cryptocurrency means positioning yourself at the forefront of a financial revolution that shows no signs of slowing down. And yet, owning and storing digital tokens involves numerous complexities and can also be very risky due to their inherent volatility. Fortunately, there are several ways to gain crypto exposure without having to directly buy the tokens. For example, btc futures offer regulated exposure to cryptocurrencies, which is one of their biggest advantages for those who want to avoid the wild price swings, giving them confidence to join this market. Read on to learn more about crypto futures and discover three other alternatives that don’t require direct exposure to this asset class but can still offer excellent opportunities.
Cryptocurrency futures
Simply put, cryptocurrency futures are contracts between two investors who want to bet on the future price of a crypto and benefit from it without directly buying the asset. They simplify the process of investing in cryptocurrencies such as Bitcoin, as there’s no need to create a wallet, and they are also safer compared to owning crypto directly, because they have positions and price limits that allow you to reduce your risk exposure. While Bitcoin has the most trading volume, there are also cryptocurrencies to consider if you want to get started with futures, such as Solana and XRP.
It’s worth noting that futures contracts are highly sensitive to market conditions, with factors such as geopolitical events and economic data having a significant impact on prices. Unexpected market changes can make trading stressful, leading to quick decision-making and adding to financial and emotional pressure. This is something to keep in mind when opting for crypto futures.
Exchange-traded funds
One of the most straightforward ways to invest in cryptocurrencies like Bitcoin without directly purchasing them is through exchange-traded funds (ETFs), which allow you to gain exposure to the asset through traditional brokerage accounts, making them easily accessible globally. The emergence of crypto ETFs has marked a massive shift in the regulatory landscape of cryptocurrencies, lending legitimacy to the asset class. The most attractive trait of crypto ETFs is their convenience, as they eliminate the headache of setting up a wallet, managing private keys, and so on. All you need to do is buy ETF shares from your broker, just as you would with a traditional ETF, which makes crypto exposure possible for both institutional and retail investors.
Notably, investing in crypto ETFs cuts the risk of direct crypto ownership while providing the opportunity to benefit from market trends. However, unlike the 24/7 nature of crypto platforms, ETFs are traded during regular stock market hours, which is something to keep in mind, as it can limit your ability to react to market movements outside these hours.
Cryptocurrency stocks
Cryptocurrency stocks are shares in companies or publicly traded funds that have major exposure to crypto or another blockchain technology application. Crypto stocks vary as much as their underlying companies, offering investors a range of choices. One of the most popular ways for investors to gain exposure to blockchain and cryptocurrency is to invest in publicly traded companies that are engaged in the crypto industry, such as crypto mining companies, crypto exchanges, and manufacturers of mining hardware.
It’s worth noting that crypto stocks are also volatile; however, they tend to be much less volatile compared to cryptocurrencies, and one of the biggest advantages is that they are highly regulated, unlike cryptocurrencies. Furthermore, they offer diversification, which is beneficial in increasing your chances of returns. However, there are drawbacks that should be considered as well. For instance, if you buy crypto stocks on your own, it’s paramount to research the company and determine whether it is profitable before you decide to buy a stock. You also need to learn how to read annual reports and monitor the stock market, which can be time-consuming and require effort on your part.
Cryptocurrency trusts
Another method of gaining exposure to crypto is through trusts, which are similar to ETFs, only that they trade over-the-counter rather than on a traditional exchange. These trusts hold a specified amount of Ethereum and Bitcoin per share, providing exposure to the price movements of these assets. Investors purchase shares in these trusts, and in turn, the trusts hold Bitcoin or other assets. It’s worth noting that crypto trusts don’t enable daily share creation or redemption; in other words, their price can trade at a discount or premium compared to the cryptocurrency’s underlying value.
Cryptocurrency trusts have a long track record, and they also eliminate the need to manage digital wallets, but they can involve higher management fees (compared to ETFs, for example), and their liquidity is also lower and restricted to market hours and not 24/7.
The bottom line
Buying cryptocurrency can seem like an exciting endeavor, given the opportunities it provides. However, their volatility is a concern for many people, and it’s worth noting that not everyone has a high-risk tolerance and is comfortable with the idea of losing money unexpectedly.
Luckily, if you are in this category, buying and holding crypto directly is not the only option available. You can gain exposure to this evolving asset class by trading crypto stocks, ETFs, futures, or trusts, thereby eliminating the risks associated with storage and security. Each option comes with unique advantages and trade-offs, so take the time to consider your financial goals and the level of involvement you want in the market and make an informed decision that allows you to participate in the growth of the industry with confidence.
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