With over 560 million crypto users worldwide, there is a lot of excitement surrounding the potential growth of the industry. In addition, there is 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 coin that many initially viewed with skepticism to 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 financial frontier. Whether you’re looking for 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 poses numerous complexities and can also be highly risky due to their inherent volatility. Fortunately, there are several ways to gain crypto exposure without having to purchase the tokens directly. 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 the 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 provide excellent opportunities.
Cryptocurrency futures
Simply put, cryptocurrency futures are contracts between two investors who want to bet on the future price of a cryptocurrency and profit from it without purchasing the asset directly. They simplify the process of investing in cryptocurrencies such as Bitcoin, as there is no need to create a wallet, and they are also safer compared to owning cryptocurrencies directly, as 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 is 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 rapid decision-making and increasing financial and emotional pressure. This is something to keep in mind when choosing crypto futures.
Exchange traded funds
One of the easiest ways to invest in cryptocurrencies like Bitcoin without purchasing them directly is through exchange-traded funds (ETFs), which allow you to gain exposure to the assets through traditional investment accounts, making them easily accessible worldwide. The rise of crypto ETFs has marked a massive shift in the regulatory landscape of cryptocurrencies, bringing legitimacy to the asset class. The most attractive feature of crypto ETFs is their convenience, as they take away the headache of setting up a wallet, managing private keys, and so on. All you have to do is buy ETF shares from your broker just as you would with a traditional ETF, opening up cryptocurrency exposure for both institutional and retail investors.
Particularly investing in crypto ETFs reduces the risk of direct crypto ownership while providing the opportunity to profit from market trends. However, unlike the 24/7 nature of crypto platforms, ETFs trade during regular trading hours, which is something to keep in mind as it may limit your ability to react to market movements outside of these hours.
Cryptocurrency stocks
Cryptocurrency stocks are shares in companies or listed funds that have a large exposure to crypto or another application of blockchain technology. 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 by investing in publicly traded companies involved in the crypto industry, such as crypto mining companies, crypto exchanges and mining hardware manufacturers.
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. Moreover, they offer diversification, which is beneficial for increasing your chances of returns. However, there are also disadvantages to take into account. For example, if you are purchasing crypto stocks yourself, it is paramount to research the company and determine if it is profitable before deciding to purchase 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 cryptocurrency exposure is through trusts, which are similar to ETFs, only that they are traded over-the-counter instead of on a traditional exchange. These trusts own a specified amount of Ethereum and Bitcoin per share, giving them exposure to the price movements of these assets. Investors buy shares in these trusts, and in turn the trusts hold Bitcoin or other assets. It’s worth noting that crypto trusts do not allow for daily creation or redemption of shares; in other words, their price may trade at a discount or premium compared to the underlying value of the cryptocurrency.
Cryptocurrency trusts have a long track record, and they also eliminate the need to manage digital wallets, but they can have higher management fees (compared to ETFs, for example), and their liquidity is also lower and limited to market hours and not 24/7.
The bottom line
Buying cryptocurrency can seem like an exciting venture given the possibilities it offers. However, its volatility worries many people, and it is worth noting that not everyone has a high risk tolerance and is comfortable with the idea of losing money unexpectedly.
Fortunately, if you fall into this category, buying and holding cryptocurrency isn’t the only option available. You can gain exposure to this evolving asset class by trading crypto stocks, ETFs, futures or trusts, eliminating the risks associated with storage and security. Each option comes with unique benefits and tradeoffs, so take the time to consider your financial goals and desired level of involvement in the market and make an informed decision that will allow you to participate in the industry’s growth with confidence.
Main image source: Unsplash