Is it possible to invest in crypto without buying any coins? The world of crypto has come a long way since the first crypto coin, Bitcoin, was released in 2009.
With the kind of opportunities it offers to the people to make money and its huge potential for growth it can be rightfully said that 2022 will be the year of cryptocurrencies.
There is no doubt that it is already showing that it is poised for meteoric rise.
Given such an opportunity it is likely that you will not want to spend time learning about Bitcoin or crypto or blockchain technology but get involved straight away.
Like most people you too will like to get into it right away by investing your money in Bitcoin or any other crypto coin for that matter and let someone else do the learning and worrying part for you.
If you are wondering whether or not there is a way to do it in your way, luckily, there is more than one.
Even better, these are some specific ways in which you do not have to buy the crypto coins like Bitcoin or Ether directly and trade them, which is a real hassle and needs a lot of time and effort.
This article speaks of all those alternative ways in which you can make a handsome amount of money from crypto without needing to buy the coins directly.
All these ways are proven and are followed by a lot of people as of now.
Therefore, you can rest assured that if you do a little bit of research and follow any one or a couple of these ways you too will see profits pouring into your account from your investment.
Therefore, read on.
Is It Possible to Invest in Crypto Without Buying Any Coins?
Here in this article you will find some of the best ways to invest in crypto without buying the coins directly along with some of the benefits of it.
All these will be very helpful for you whether you are a beginner or a pro.
Crypto is very prospective but just as it comes with high rewards it also comes with high risk as well.
Most of the crypto investors are extra cautious, and appropriately so. Crypto as such is extremely volatile and a highly speculative investment class.
For this, most of them do not want to actually buy or hold the coins.
Therefore, investing in this risky digital asset class needs a lot of learning and understanding regarding a lot of things in order to make an informed decision such as:
- How exactly it works
- The risks involved in it
- The economics of it
- The technology underlying it and
- The market sentiments.
Knowledge of all these things is very important to achieve success in crypto investing. Research is the key to knowing its intrinsic risks.
Cryptocurrencies are innately cryptic, which is signified by its name.
It is an investment asset class that relies mostly on math and therefore, according to the advice of Warren Buffett, it is better not to invest in any business that you do not understand.
It will then be very hard to justify your decision.
While talking about crypto, the first name that comes to the minds of most people is Bitcoin.
This, ideally, is referred to as the ‘digital gold.’
However, with a total supply of 21 million and more than 80% of it already minted, it may be very hard at times for the beginners to lay their hands on the ‘real’ thing.
Moreover, a few banks and several tax-sheltered accounts may not allow you to invest in Bitcoin directly.
Add to that, the crypto exchange accounts are also not regulated by the government or insured.
Therefore, it is quite risky to get into it because it is quite easy to get besieged by the intimidating visage of the exchange order book.
This is bad news for any Bitcoin fan but it is the same with all other crypto coins.
It is primarily for these reasons that people, who are in haste to start with crypto investment, look for alternative ways in which they need to do and worry very little but still make a considerable amount of money from crypto.
There are also a few other good reasons for people wanting to make their investment in this alternative investment asset class in alternative ways.
- Its highly volatile nature that results in wild price swings at any given point of time
- It is a new and emerging technology and asset class and therefore does not have a very long proven record
- The need of regulation in the market and the products which leaves the traders and investors susceptible to hacks and scams
- The chances of losing all the money permanently with no possible recourse in spite of it being endorsed as a safe means of transactions and
- The difficulty in accessing these products in spite of being a global asset class.
However, no matter how true the above facts are, it is very hard to ignore that crypto has shown outstanding performance over the years.
Therefore, it is pretty hard not to get allured towards it. And, it is also a very exciting world of investment.
Therefore, those who avoid crypto may feel like the lonely kids at the pool party!
And, there are others who desperately want to join their friends enjoying the pool at the deeper end but are too nervous to jump in.
Well, they do not have to deprive them from the enjoyment any more since here are a few good alternatives.
Perhaps, one of the easiest and safest ways to get an exposure to the crypto environment without buying any coins itself is to invest in a stock of a publicly traded company that is involved with crypto or blockchain technology and holds some stake.
Since these companies are betting their money on the success of the coins, you can do it as well but making those companies act like a buffer for you.
However, there is a catch here. If you invest in individual crypto stocks, it can bear the same kind of risks as investing in an individual crypto coin.
Therefore, instead of investing in individual crypto stocks you should look for diversifying your portfolio.
You can do it easily by investing in diversified Index Funds. Just make sure that you choose those funds that have a proven track record and come with a high prospect of growth in its value in the long term.
Typically, you will be surprised to know that most people with an investment portfolio allocated in ETFs and index funds or with a retirement plan usually have some sort of exposure to crypto.
There are lots of different and best index funds, such as S&P 500, comprising publicly traded companies that are involved in some way or the other with the crypto industry.
This can be in different ways such as:
- Crypto mining
- Development of blockchain technology or
- Holding momentous amounts of crypto.
However, when you invest in stocks of these companies, follow the tips of the experts who suggest that the total amount of your investment in them should not be more than 5%, whether it is special index funds, stocks of a single company or crypto itself.
These are not the only ways in which you can diversify your crypto investment portfolio to get an exposure to the environment and at the same time minimize the potential risks and maximize the returns.
There are lots of other ways to do so without needing to buy the crypto coins directly.
Investing in regulated derivatives products is one such way.
Trusts, options, ETFs, futures – there are lots of different derivatives that you can choose from.
These may sound complex and may put you off but there is no need to panic.
The good thing about these derivative financial products is that they come with the advantage of being regulated.
This means that you will be safeguarded by a set of consumer protections as an investor.
This benefit is in addition to the far clearer tax guidance on these regulated instruments which is found lacking notably in cryptocurrencies.
Another good thing about investing in these products is that you do not need to create a digital wallet or even go through an unregulated crypto exchange to invest in these derivatives.
These derivative financial products are fundamentally tradable shares or contracts that track the price of the underlying asset.
This means that you do not need to buy the coins to trade them. You can trade the paper that represents the coins instead.
You can go for cash settled or physically delivered contracts or shares according to your wish and preference.
If you want to minimize the risks even further while getting an exposure to crypto without buying the coins directly, you can also invest in crypto Exchange Traded Funds or ETFs.
This is a good way to follow for those who are extra cautious about investing in crypto.
You may also invest in Bitcoin options and futures if you are not okay with the fact that with the derivative products you can only trade claims on the price of coins.
A futures contract will allow you to purchase and sell crypto coins in the future at a predetermined price of today.
This is however a process of speculating on the future price of the coin.
If it is right, you win more coins at a bargain price which you can sell off at the market price which is higher at that moment when the contract expires.
But, if the price moves in the way opposite to your predicted quote, you will eventually end up paying a high price for a low-priced coin.
You will then have to sell it off at a loss.
Some futures contracts come with an expiry date and can be settled in cash but there are others that are perpetual swap contracts.
These are the futures contracts that do not expire.
Investing on these types of contracts is good because you will then be able to speculate on the price not for once but for several times, forever.
You may also choose another avenue to invest in crypto but not buy the coins directly which is a trading options contract.
In this process you determine the price of a coin, called the stake price, for a specific period of time.
In this process, you are not obligated to buy or sell the coin at that price at the date of expiry of the contract.
However, in order to avail this benefit you will need to pay an upfront price called the ‘premium.’
However, please be informed that both futures and options contracts are complicated derivative products.
And, in the United States, you will need some additional approvals before you can begin buying calls and puts.
You may also invest in a crypto infrastructure which is another good way to get exposure to the crypto environment without buying the coins directly.
This may include and not limited to crypto mining and mining materials such as:
- ASIC miners
- Cloud computing power
- Energy and
You may also trade with synthetic Bitcoin if you are a Bitcoin fan but do not like its limitation in interoperability with other blockchain networks.
These are those specific coins that are minted on a different blockchain but are tied to the price of Bitcoin.
One of the most popular versions of synthetic Bitcoin is wrapped Bitcoin or wBTC as it is referred to in short.
This is an ERC 20 token and locked up in secure vaults owned by BitGo, a crypto custodian.
You can stake these coins on any Ethereum-based DeFi or Decentralized Finance protocols.
Now, take a look at these alternative ways of crypto investment without buying the coins directly in detail.
Investing in crypto stocks or companies involved in this specific industry is one good option to start your crypto journey without needing to buy the coins directly.
These crypto stocks are traded typically like any other stocks on regular stock exchanges where these can be bought or sold.
A few significant benefits of investing in crypto stocks include and are not limited to:
- You do not need to put in any money on digital currencies
- These crypto stocks are less volatile compared to the digital currencies and
- These stocks are typically regulated by government authorities, which add to the safety levels of the investors.
On the flipside, the downside of investing in crypto stocks is that the gain potentials are not the same as investing in crypto coins directly.
You can invest in crypto stocks in quite a few different ways such as:
- Invest in a company directly that is involved in the crypto industry in some way or the other and
- Invest in a crypto exchange that lets the users buy digital currencies.
However, remember that investment prices can rise or fall because the stock markets are not completely free from volatility.
Investing in crypto ETFs or Exchange Traded Funds is another good way to get into the crypto space without buying the coins directly.
These funds typically track the performance of the digital currencies and are pretty much the same as the traditional ETFs with the only difference that these ETF deal with cryptocurrencies instead of traditional stocks and shares.
There are a few specific funds that may track a bunch of different types of digital assets.
If you invest in them you will eventually get a much broader exposure with a single purchase.
Once again, you must keep in mind that the value of the ETFs may increase or decline.
This means that you can make profit or lose your money in it as well.
At this point, you should know a bit more about Bitcoin ETFs in particular, which is the only approved crypto ETF in the US.
It can be traded on the stock market and its shares are comparative to the price of Bitcoin.
However, the ‘spot’ ETFs are available in a few countries only such as in Canada and Brazil.
The third good alternative option to invest in crypto without buying the coins is to mine the coins.
Crypto mining is a process in which the transactions made on the blockchain are verified by the participants on it themselves.
In the process, the one who solves the complex mathematical puzzle first is rewarded with the coins.
The downsides of this process are that it is not at all cheap and needs a lot of computational power to be the first to win the reward.
It also consumes a lot of energy which creates a huge negative impact on the environment.
Therefore, if you are wary about the economic and environmental costs, crypto mining is not an option for you.
Also, crypto mining may not be profitable if you have an inferior or less powerful setup or if you live in a place where electricity is not cheap.
However, joining a mining pool or using cloud computing may increase your profitability chances and reduce your operational cost respectively.
Investing in blockchain technology is also an option available to those who are least interested to buy crypto coins directly but still want to get an exposure in this exciting space.
You can buy the shares of a company that invests in blockchain technology which could be anything from mining crypto coins to developing an app based on blockchain.
The blockchain technology will grow significantly in the future and therefore these companies will also grow along with it.
Therefore, investing in them will provide you with a potential upside and make profits without needing to buy and hold crypto coins.
You can also invest in blockchain technology through the venture capital firms. These firms typically invest in blockchain startup companies.
These companies may develop new apps based on this technology or work on improving the underlying protocol of blockchain technology.
The benefits of investing in a blockchain tech company is that the potential returns are quite high and you will get an exposure to some of the most inventive projects in the space and at the same time diversify your risks.
You may also invest in one ‘Blue Chip’ company that is involved with blockchain development or provide specific services to the cryptocurrency industry.
These services could be anything from exchanges to custodial services and even payments processors to cloud computing services to several major crypto exchanges.
Since Blockchain-as-a-Service is an industry that is growing rapidly, the benefit of investing in these companies is that you will also grow with them without needing to own the digital assets directly.
Do not confuse blockchain ETFs with crypto ETFs, which is another good alternative option to invest in if you do not want to buy and hold crypto coins directly.
These ETFs also work in a similar way as a hybrid between stocks and mutual funds.
When you invest in a blockchain ETF you invariably buy a share of a bunch of investments owned by it.
Blockchain technology is highly transformative and given in today’s scenario it is considered to be a sound and quite a rewarding investment option.
Typically, a blockchain ETF consists of those specific companies that are involved in some way or the other with either developing or using blockchain technology.
You can compare these companies to the people experiencing the ‘Gold Rush’ effect in California in the 1800s.
A lot of people rushed to dig gold. Not everyone made it but those who did sold the shovels.
These blockchain companies that support the expansion of blockchain are those shovel sellers of California.
Companies Investing in Crypto
You can also invest in regular companies that invest in crypto themselves if you want to get an exposure in the crypto space but do not want to invest in the volatile assets directly.
You will find a lot of such companies out there who are involved in crypto investment to reap the benefits of it with the huge amount of excess money they have.
Some of these companies may invest in digital assets directly but there may be some that may follow a completely different approach.
The main reason for which different companies are now interested in investing in crypto is the need to consider an alternative source of income and assets on the balance sheets.
This is due to the convergence of the monetary, macroeconomic, and digital evolutions in a global scale that has forced the large corporations to think and look forward.
Moreover, the financial ecosystem along with the regulatory measures for the digital currencies, especially Bitcoin, has matured quite enough by now.
It has, in fact, reached to a point where it is considered to be approachable, accessible, and potent to become mainstream.
Therefore, when you invest in the shares of these companies, you are actually investing in crypto.
Since these are traded publicly you get the exposure as well.
There are a few companies that specifically hold and trade crypto coins, especially Bitcoin.
These companies are publicly listed companies and are therefore safe to invest in.
Their performance is typically connected to the price of Bitcoin.
However, it is better in this case to find a few companies that have interest in crypto and invest in all of them instead of investing in one particular crypto-forward company.
This will diversify your portfolio and distribute the risks.
Choose companies with reasonably good potential and also make sure that the shares you put your money into are included in an index fund.
Finally, if you are not keen on making any financial investments but still want to earn some crypto, you can choose to play a few specific games.
There are several games available out there that will pay you in digital currencies only. It needs a little bit of research to find them.
This is a fun way to earn some crypto without investing directly in the digital assets and therefore involves low levels of risks.
However, you must keep in mind that playing these games and earning crypto in the process will not make you rich.
For that, the other processes are more feasible to choose.
However, these games will also be a good one to choose if you are very creative.
You can earn some additional tokens by creating digital assets, weapons, or other types of in-game items for these games and sell them for crypto.
All these are good ways to get involved with crypto without buying the coins actually.
However, no matter whichever alternative option you choose, you should go ahead with extreme care and caution, as you would do with any other speculative investment.
Also, remember that none of these processes guarantee profits since all of these may experience the same effects of volatility as an actual crypto coin would.
Therefore, you should be willing to take on the risks just like you would while investing in any particular crypto coin directly.
However, sticking to index funds is probably the best bet if all these are a bit too much for you.
There are lots of ways in which you can get an exposure to the crypto environment without actual coins in your portfolio.
If you were unaware of it, well, you are not any more. But, do your due diligence and go ahead with caution.
I have special interest in crypto and intend to help common people to gain knowledge about the digital asset as well as its potential. Follow Me at Linkedin.