How to Invest in Cryptocurrency Without Buying Any

Cryptocurrencies are by definition enigmatic – the name says it all. It may be difficult to justify investing in a currency built of math rather than gold if you follow Warren Buffett’s advice to never invest in firms you don’t understand.

However, it’s difficult to overlook some cryptocurrencies’ incredible performance: In March 2020, the price of one Bitcoin had risen from just under $5,000 (approximately Rs. 3.74 lakhs) to over $60,000 (about Rs. 44.91 lakhs) in April. As of October 6, the price of bitcoin in India was Rs. 40.62 lakhs (6:22 pm IST).

The buzz around digital currency may make some investors feel like the lonely child at the pool party who wants to join their pals at the deep end but is too afraid to jump in.

For those investors who are cautiously interested, here are several methods to get exposure to cryptocurrencies without buying them, as well as how to reduce your risk if you do decide to buy them.

Invest in firms that hold cryptocurrencies: Consider this method to be a bitcoin investment with a twist. Cryptocurrency is held by certain publicly listed firms. Because they’re banking on it succeeding, you can, too, with those corporations functioning as a safety net.

“It really spans the range from how direct or indirect you are in terms of that exposure when you’re thinking about investing in a firm because they have exposure to crypto,” says Douglas Boneparth, a certified financial planner and president of Bone Fide Wealth in New York City. “It all relies on the percentage of their balance sheet that is in cryptocurrency.”

Examining a company’s balance sheet may disclose a lot of information: Tesla has $1.31 billion (approximately Rs. 9,806 crores) in digital assets as of June 30, 2021. While Tesla’s $1.31 billion investment has gotten a lot of attention in the media, it only accounts for roughly 2.4 percent of the company’s overall assets. However, if those assets rise in value, as cryptocurrency is prone to doing, Tesla’s stock price may rise as well.

Invest in the infrastructure of cryptocurrencies.

Investing in firms with a stake in the cryptocurrency sector is another approach to obtain exposure. Coinbase is a publicly listed platform that allows investors to purchase and sell cryptocurrencies.

Prepare for the launch of a bitcoin exchange-traded fund (ETF).

Despite the fact that the Securities and Exchange Commission has yet to authorize bitcoin exchange-traded funds, there is a need for them. A cryptocurrency ETF would work similarly to any other ETF, only it would follow a cryptocurrency rather than a stock market index like the S&P 500. A Bitcoin ETF, for example, would monitor the price of Bitcoin.

“Many different ETF efforts have been made, and many of them have been rejected. There are Bitcoin ETFs that have been approved in other countries, and I believe it’s only a matter of time,” says Tristan Yver, the head of the strategy at FTX.US, a US-regulated cryptocurrency exchange. “I don’t know when this will happen, but I believe it will, and I believe it will allow individuals who aren’t comfortable investing directly in digital assets to have exposure to Bitcoin and other cryptocurrencies.

If you’re going to invest directly, proceed with caution.

There are a few strategies to reduce your risk if you’re ready to invest directly in cryptocurrencies. Reducing the quantity of money you invest is one approach to achieve this. Some credit cards, similar to cash back or miles, provide bitcoin incentives. You don’t even have to use your own money if you desire to add cryptocurrencies to your portfolio as a reward.

Another option is to invest in stablecoins, which are comparable to typical cryptocurrencies but are backed by real-world assets, making them less susceptible to big price decreases.

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