Investing In Bitcoin Without Owning Bitcoin: Is It Possible?
by Arnab Dey Investing Published on: 22 November 2022 Last Updated on: 16 October 2024
Bitcoin has grown in popularity among today’s investors over the last few years. There is no question about it. However, the issue for investors is that the currency’s naturally known volatility is also present.
Also, digital coins can be just as difficult to obtain as the real thing. Certain income accounts and certain banks may not allow you to invest in Bitcoin instantly.
Cryptocurrency exchange accounts are really not government-insured, and it’s easy to become overwhelmed by the intimidating appearance of an investment trading system.
However, there are still numerous investment options in Bitcoin without directly purchasing it and even cryptos, or the new technology that powers it, without simply holding any coins.
Though it may not totally protect investors from the volatility that is synonymous with cryptos, it can provide some protection against loss.
How Does It Work?
For any of those investors who are really carefully intrigued, here are some methods to gain exposure to Bitcoin without purchasing it, as well as ways to reduce your risk if you do decide to buy.
1. Invest in Blockchain Exchange-Traded Funds (ETFs)
The rise of Exchange Traded Funds (ETFs) that provide access to Bitcoin and other cryptocurrency companies is a relatively new development in the crypto space. ETFs, which can be bought on a stock exchange, record the performance of a particular industry or sector.
Blockchain exchange-traded funds (ETFs) record the performance of companies that are developing, implementing, or benefiting directly from distributed ledger technology.
That includes fewer companies, such as MicroStrategy and Galaxy Digital Holding. All of which expose you to the technology involved that powers Bitcoin and Ethereum.
Blockchain ETFs:
- Amplify Transformation Data Sharing ETF (BLOK)
- Siren NASDAQ NexGen Economy ETF (BLCN)
- First Trust Indxx Innovative Transaction & Process ETF (LEDG)
- Bitwise Crypto Industry Innovators ETF (BITQ).
2. Invest In Grayscale Bitcoin Trust
Grayscale Bitcoin Trust is a fund introduced by Grayscale. Investments are the main source of indirect exposure to digital currencies used by investors.
Grayscale purchases hold and protect cryptocurrency on your behalf. It’s a big selling point for traders who are concerned about keeping their bitcoin stash safe.
Furthermore, the Grayscale Bitcoin Trust (GBTC) is a publicly listed, SEC-reporting company that can be invested in through standard stock brokers, allowing access to traders who are somewhat comfortable trying to navigate other opportunities to try to acquire bitcoin.
It operates two investment trusts (that is, investment vehicles that strategically deploy capital from multiple investors). One is composed of Bitcoin and the other of Ethereum, the two most important digital currencies.
It enables investors to purchase bitcoins without requiring a digital wallet. However, the fund charges a 2% service fee, which investors would not have to pay if they held it directly.
3. Invest in crypto-exchange platforms
In recent years, cryptocurrencies have grown in popularity, and so have businesses that provide a secure and safe way to buy and sell digital assets.
Many of them are now publicly traded companies in which you can invest. Investing in brokerages like Bitcoin-loophole.io, which allows users to trade digital currencies, might be a good proxy for investing in the cryptocurrencies themselves.
Because brokerages benefit from the increased stock prices as the capitalization of all cryptos grows, you’ll have a more wide-ranging upside that isn’t tied to the achievement of just one cryptocurrency.
4. Traditional Financial Instruments with Derivatives
Exchange-traded funds (ETFs), trusts, options, and futures may sound complicated and intimidating, but don’t be alarmed.
Derivatives are exchangeable agreements or stocks that track the profit margin of an underlying value, in this case, Bitcoin.
Instead of buying Bitcoin directly on a poorly regulated cryptocurrency exchange, you could indeed efficiently and successfully start a trading paper that signifies it.
Contracts or shares can be recognized in other comprehensive income (earnings) or with exact Bitcoin (physically delivered).
These investment instruments have the advantage of being regulated, which means that investors are protected by a wide variety of consumer safeguards.
Not to even mention that tax guidelines on regulated instruments are far simpler than before when trying to deal with cryptocurrency directly. Therefore, there is no need to establish a cryptocurrency wallet or explore an unregulated exchange.
The Bottom Line
Putting money into Bitcoin via the better approaches discussed above may be far safer and easier than trying to hold the cryptocurrency.
While taking advantage of the crypto market, gains can be made while using a traditional trading account, which provides extra security and ease of use.
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