How to invest in crypto without buying crypto

If you want to buy cryptocurrencies, you can choose between Bitcoin, Ethereum and other altcoins. However, there are also indirect ways to explore the crypto world. Here’s a closer look at what you need to know if you want to invest in crypto without buying crypto.

What is Indirect Crypto Investing?

If you do not want to open an account on a crypto exchange and buy cryptocurrencies, you are not out of luck. You can make an indirect investment in cryptocurrency where you get exposure to it without buying it yourself. The indirect investment is made using traditional methods such as shares, mutual funds and exchange-traded funds (ETFs).

Again, there are pros and cons to consider, including security, fees and risk of loss. When you buy cryptocurrency through a third party, that third party is going to make money in some way, so you should consider that when deciding whether to buy crypto using an indirect investment.

Crypto ETFs and mutual funds

Mutual funds are the first way to buy crypto without buying crypto directly. One of the early notable participants of this offering is Grayscale Bitcoin Trust. Although it functions like an ETF, legally it is a completely different type of entity. However, investing in GBTC through your brokerage account will effectively achieve a similar result to buying a Bitcoin fund. The investment price will go up and down with the market price of Bitcoin.

The major disadvantage of grayscale is the expense ratio of 2%. They simply charge 2% to buy Bitcoin and hold it in a wallet in your name. You can do it yourself quite easily without paying an ongoing 2% fee.

Other funds include ProShares Bitcoin Strategy ETF (BITO), Valkyrie Bitcoin Strategy ETF (BTF), VanEck Bitcoin Strategy ETF (XBTF), Global X Blockchain & Bitcoin Strategy ETF (BITS), and Bitwise 10 Crypto Index Fund (BITW). Fees and underlying investments vary based on which fund you choose, so be sure to read the prospectus carefully and know what you’re getting.

Cryptocurrency and Blockchain Stocks

If you want to buy a share that exposes you to crypto, you can choose between companies that work in the blockchain industry and companies that invest in or keep cryptocurrency on their balance sheet.

Companies in the cryptocurrency industry are involved in cryptocurrency mining, software development, and other services. Stocks include Riot Blockchain (RIOT), Canaan (CAN), HIVE Blockchain Technologies (HIVE), and Bitfarms (BITF). Coinbase (COIN) is one of the largest and most recognized cryptocurrency exchanges and stocks.

Generally, when there is a downward trend in crypto prices, many cryptocurrency stocks also struggle. Keep these risks in mind when buying, and consider working with a trusted financial professional if you have any doubts about your investment decision or plans.

Bonus tip: Credit card rewards

A final method to fill your cryptocurrency portfolio without opening your fiat wallet is with credit card rewards. Several cards allow you to earn crypto when you swipe, tap, dip, click or do anything else to use a credit card for payment.

Notable personal cryptocurrency credit cards are BlockFi Rewards Visa Signature Card, Gemini Credit Card, and Upgrade Bitcoin Rewards Visa. The Crypto.com exchange and Coinbase also have a rewards card offer.

Some cards, like the SoFi Personal Credit Card or the Venmo Credit Card, offer flexible redemption options, including cryptocurrency. When you earn crypto as credit card rewards, you invest in crypto without buying crypto. Even if it goes down in value, you didn’t pay for the crypto, so all you walk away with is profit.

The bottom line

Cryptocurrencies are sometimes hailed as a technology that will change the world. Investing indirectly in crypto is a good option for those who want to be a part of the new technology, but with caution. As a result, the portfolio will be more diversified, and the risk will be more evenly distributed.