A lot of people are thinking of investing in cryptocurrency but they are afraid. Cryptocurrency can be a profitable investment, but it is also high-risk. Imagine, even experienced investors are somewhat cautious when dealing with crypto. But for those who are interested in cryptocurrency but not in buying or holding it, there are many ways to invest, albeit indirectly.
The following article will help you find the right strategy, minimize the risks and get much profit, so continue reading.
Know about its agenda
Cryptocurrencies like Bitcoin, Ethereum, and Dogecoin have attracted worldwide attention over the past few years, and some investors are taking the plunge into the crypto business, hoping to make a fortune.
Even after continuous forecasting and market analysis, there is a risk of failure. But let us also tell you that the future is still unclear as things are changing rapidly. Under the pressure of the COVID-19 pandemic, it is equally possible that cryptocurrencies may one day become worthless. Yet, nowadays, it's hard to ignore the temptation of cryptocurrency as it continues to grow.
There are three main methods that investors can follow to invest in cryptocurrencies without actually owning them.
Invest in Cryptocurrency-Holding Companies
Most people understand that buying cryptocurrency usually means receiving currencies directly, such as bitcoin tokens. But in reality, there is no need to buy the token itself as it is better to invest in crypto stocks.
Many people are curious to know what is a crypto stock? So let us tell you that Crypto Stock is an organization that is somehow associated with the cryptocurrency movement. An investor gains indirect access to bitcoins, for example, by investing in companies that keep them on their balance sheets or operate services related to the digital currency. People can choose from a plethora of publicly traded enterprises that meet this criterion. MicroStrategy and Tesla are two widely known giants that have invested heavily in this area.
Tesla
If we talk about Tesla, let us tell you that Tesla spent $1.5 billion in bitcoin and initially agreed to accept it as payment for its products. But you should also know that the company recently abandoned the idea of accepting bitcoin and even sold most of its bitcoin supply. Later, Elon Musk also said that Tesla would have sold his entire bitcoin holdings. He explained his decision not to return the bitcoins anymore because bitcoin mining is not environmentally friendly. Musk is a supporter of Dogecoin, and people think Dogecoin might be his currency of choice as he consistently welcomes it on his Twitter.
MicroStrategy
For information, let us tell you that Virginia-based business intelligence company Microstrategy is famous for its significant investment in bitcoin. In August 2020, MicroStrategy invested $250 million in bitcoin, explaining this decision with declining returns from cash, a weakening dollar and other important economic factors. In total, the company has invested more than $2 billion in bitcoin ($24,311 per unit), and its stock price now depends on the bitcoin price rally.
Coinbase
If we talk about Coinbase, let us tell you that Coinbase is the first American company to operate a cryptocurrency exchange platform listed on the US Nasdaq Exchange. In April, the company announced an increase from $190.6 million in the previous year to $1.8 billion. The surge was provoked by the increase in the price of bitcoin at the time.
As for the value of the Nasdaq, the Nasdaq set a reference price of $250.00 per share, giving the company an estimated value of $47 billion. At the end of its first day of trading, Coinbase closed at $328.28 per share.
In early June 2021, Coinbase also began working with Dogecoin, available to Coinbase Pro users.
Square
The digital payments company has also put approximately 1% of their total assets ($50 million) in Bitcoin in October 2020, now worth around $220 million. In February 2021, the company bought an additional $170 million worth of Bitcoin, making Square’s total holdings almost $500 million in cryptocurrency. Besides, Square allows its sellers to accept various types of cryptocurrency as a form of payment.
But the truth is that none of these companies focus entirely on cryptocurrencies, but it is a significant part of their business. If cryptocurrency takes off one day and becomes far and widely accepted as a form of payment, these enterprises will make substantial profits from it. By investing money in these types of stocks, you can enjoy the success of cryptocurrency without even facing the risk of buying crypto tokens directly.
What Else to Expect from Crypto Stocks?
Investing like this can be a great way to reduce your risk, but there are a few things you need to consider before you get into it.
Firstly it is important to avoid buying stocks as it is associated with cryptocurrencies. If a company has weak potential and crypto doesn't succeed in the long run, that stock will experience a hard time recovering. On the other hand, strong companies are more likely to recover from the crisis despite any movement in the crypto market.
Before making a decision about a stock, be sure to do thorough research. Is the company financially sound? Does it have an official team of professionals? Does it have a competitive advantage in its field? With all these parameters, it will be easy to make a big picture. It is important for any company to look at the long-term prospects. If a business fails, it doesn't matter whether it was involved in cryptocurrency or not.
Also note that if you intend to invest in crypto stocks, make sure there is a broad mix of investments, not just focusing on just one. If your crypto investment is not successful, building your diversified portfolio can further limit your risk.
Cryptocurrency is certainly one of the most popular trends in the investment world, but it can be risky. Even in the crypto sector, there are many options to choose from. You can choose Bitcoin, Ethereum, Dogecoin, or all together – these different assets work together to reduce the investor's risk in case of unexpected losses.
Invest In Companies That Deal With Cryptocurrency-Related Sectors
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If you want to earn from cryptocurrencies as well, then as an investor you can also earn from cryptocurrencies by investing in companies dealing with blockchain technology.
PayPal is probably the most well-known company (200 million users) that lets investors invest in bitcoin indirectly. In addition, Galaxy Digital and Riot Blockchain represent a diverse financial services and investment management innovator in the digital asset, cryptocurrency and blockchain technology sectors.
In addition, giants such as Microsoft, Google, IBM, Amazon and SAP are all involved or trying to use blockchain technology in many aspects of their business to some degree.
Another way is to invest your money in companies that design specialized hardware used by cryptocurrency miners, such as those that produce GPUs (graphic processing units) installed in computers for blockchain technology.
Nvidia
For information, let us tell you that this company produces computer GPUs which are widely involved in cryptocurrency mining. They cannot power computer monitors, but they can generate valuable digital coins. In February, as cryptocurrency prices rose, Nvidia released new processors specifically for crypto mining.
By the way, Nvidia offers a pro-level cryptocurrency mining GPU that allows miners to get maximum performance.
Invest In Cryptocurrency-Linked Investment Funds
Grayscale Bitcoin Trust
Grayscale Bitcoin Trust, a fund created by Grayscale Investments, enables investors to gain indirect exposure to the price movement of Bitcoin through a traditional investment vehicle. Moreover, the trust allows investors to buy cryptocurrencies with no need for digital wallets. The fund charges a 2% management fee, which investors would not pay if they purchased it directly.
The growing interest in cryptocurrencies has prompted exchange-traded funds (ETF) issuers to promote the creation of funds that keep an eye on the performance of Bitcoin. It is believed that ETFs can simplify trading and diminish the difficulties of portfolio merging and storage. Following the creation of cryptocurrency ETFs in Canada, several US companies have also filed applications to establish Bitcoin ETFs. Grayscale Investments intends to turn its trust into an exchange-traded fund as soon as the US government approves it.
Osprey Funds
The Osprey Funds’ approach focuses on secure, low-cost, and easy access to digital assets. It also provides a safe and effortless way to gain exposure to Bitcoin in an investment portfolio. The trust carries the lowest management fee of 0.49% among any publicly listed Bitcoin fund in the US.
The trust can be held in an individual retirement account or other tax-advantaged accounts. In addition, the Osprey Bitcoin Trust allows you to interact with Bitcoin with no worries about wallets, keys, or storage.
Conclusion
As such, there are many ways you can expose your portfolio to cryptocurrencies without actually buying coins, but invest with caution and use all your due diligence as you would any other risky investment.
For information, let us tell you that none of these stocks or particular ETFs are guaranteed to be successful. Anytime they can really start to experience unexpected stress due to market volatility and rapidly changing processes in global economics. As with any crypto and non-crypto investment, be prepared to accept the risks involved.