What happened last week depicts exactly why some people are reluctant to invest in Bitcoin. Just one tweet by billionaire Elon Musk has caused Bitcoin to lose nearly 15% of its value.
According to Bloomberg, however, for some investors, there are still other ways to bet on the future of cryptocurrencies. Maybe you know nothing about Bitcoin but are still interested in the rise of digital currency.
Or you understand Bitcoin deeply and don’t want to touch an asset whose price fluctuates too much and doesn’t follow any such rules. Or you own Bitcoin but want to find ways to diversify your investment portfolio in the crypto world.
This year, the U.S. Securities and Exchange Commission (SEC) intends to issue a final verdict on the approval of Bitcoin-tracking ETFs. At the same time, several crypto-related companies just went public. And companies that buy large amounts of Bitcoin can also be seen as an indirect means of accessing Bitcoin.
Just like the category of digital currencies, the cryptocurrency ecosystem is expanding rapidly and is gradually being accepted by mainstream channels. However, Bitcoin itself is not yet allowed to be traded at many traditional brokerage accounts.
Here are some alternatives through which investors can still gain access to Bitcoin without having to buy Bitcoin directly.
Buy shares of a Bitcoin-related company
Companies have a structure more familiar to investors: the leadership team makes decisions, and the company is required to disclose financial information. “It’s easier to invest in an industry you already know and the company is applying technology that you believe will work,” says Sweta Bhargav, a financial advisor at Advisor Wealth in Philadelphia. “That would be a good start.”
For example, Coinbase Global just listed shares on Nasdaq last month. Because most of Coinbase’s revenue comes from user fees, the exchange’s market capitalization is highly correlated with Bitcoin’s price.
In the filing with the SEC, the company also asserted: “Our net revenue is essentially dependent on the price of digital assets and the volume of transactions conducted on the platform.”
Alternatively, investors can focus on companies that bet big on Bitcoin, such as Tesla or MicroStrategy, and Galaxy Digital Holdings.
Invest in technology
Bitcoin is a digital currency that allows Bitcoin miners to use a powerful computer system to create this currency from scratch.
“You don’t have to be a computer geek anymore to mine,” said Julius de Kempenaer, technical analyst at Stockcharts.com.
In this area, Marathon Digital Holdings and Riot Blockchain are two of the biggest players. On its website, Marathon says owning shares in the company will give you access to Bitcoin without having to physically hold the asset.
In April, Castle Rock said it was buying North America’s largest Bitcoin mining facility for $651 million (cash and stock).
Grayscale Bitcoin Trust is a trust fund created by Grayscale Investments in 2013, allowing investors to own Bitcoin without having to set up a digital wallet. However, the disadvantage of this option is the high fee (2%).
The bitcoin craze has many parties betting that they will soon be licensed to set up an ETF that tracks Bitcoin. Grayscale Investments said it will convert the trust fund into an ETF as soon as it is approved by US authorities.
The SEC has not yet approved it, although many applications have been filed. Since February the first Bitcoin ETF in North America has been licensed in Canada.
Investors argued that a Bitcoin ETF would allow them to buy and sell Bitcoin more easily, removing the complexities around hoarding and portfolio integration.
For now, the Amplify Transformational Data Sharing fund, which tracks companies related to cryptocurrency and blockchain technology, could be an option.
The fund tracks the likes of PayPal, Square, Visa, several listed Bitcoin miners, and companies that make chips used to mine cryptocurrencies like Nvidia.
And there are always Altcoins
Research from exchange Binance shows that the prices of cryptocurrencies frequently move in the same direction, rising and falling together.
Litecoin, a coin launched in 2011, is up 178% year-to-date compared to Bitcoin’s 87% gain. Ethereum, the 2nd largest cryptocurrency today, has increased in price by 440% in the same period.