Want exposure to bitcoin without holding cryptocurrency yourself? Here’s some investing ideas

Personal finance

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Dado Ruvic | Reuters

Bitcoin‘s trademark rollercoaster ride is back — and doesn’t look to be letting up anytime soon.

On Monday, bitcoin rebounded and traded up roughly 14% near the 38,000 level after slumping to less than $32,000 on Sunday. The choppy movement comes just days after bitcoin plunged 30%, near the $30,000 mark, on May 19. Bitcoin hit an all-time high near $65,000 in April.

“I think the volatility will continue,” Mohamed El-Erian, chief economic adviser at Allianz, said Monday on CNBC’s “Squawk Box.” ”The roller coaster, the up and down.

“We’ve traded in the $30,000-to-$44,000 price range in a week,” he added. “That’s enormous.”

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Even though the cryptocurrency has skyrocketed over the last decade and has gained mainstream support from big banks, it can be a complicated investment for most retail investors. It’s historically expensive, volatile, can’t be purchased through a traditional brokerage account and isn’t backed by a financial institution.

There are a few ways that people can invest in cryptocurrency and even bitcoin specifically, or the technology behind it, without holding any actual coins themselves. While it might not completely shield investors from cryptocurrency’s trademark volatility, it can give them some protection from loss.

“There are things that you can do for indirect exposure,” said Tyrone Ross, an investment advisor and CEO of Onramp Invest, a digital investing platform. “If people do that, I think it’s better and it’s safer before they actually start to delve into the [bitcoin] rabbit hole.”

Invest in companies that hold cryptocurrencies

One way to have exposure to bitcoin without holding it is to invest in the stocks of companies that have cryptocurrency related services or hold coins themselves, said Ross.

That includes a wide group of publicly traded businesses throughout different sectors that have either added bitcoin to their balance sheet or have services for storing or paying with cryptocurrency.  

For example, in February, Tesla bought $1.5 billion worth of bitcoin and said it would soon accept the digital currency as payment. Of course, in May CEO Elon Musk announced that the automaker suspended vehicle purchases using the cryptocurrency over environmental concerns, adding to bitcoin’s volatility.

Look at companies with related technology  

Another way that investors can get exposure to cryptocurrency is by investing in publicly traded companies that have technology related to trading coins or use blockchain, the technology that bitcoin is built on.

Experts also called out companies such as Square and Paypal that allow users to trade cryptocurrency on their platforms. In addition, companies such as Riot Blockchain and Galaxy Digital focus on cryptocurrency and the underlying technology. And, big technology names such as Microsoft, IBM, Google, SAP and Amazon all use blockchain in different parts of their business.

There’s also underlying hardware that people could invest in to have exposure to crypto without holding coins.

“Someone could also buy into companies that make graphics processing units (GPUs), which are needed in order for computers to solve the math equations for the blockchain technology,” said Anjali Jariwala, a certified financial planner, CPA and founder of FIT Advisors in Torrance, California.

Investing in company stock is much easier and likely safer than investing in a cryptocurrency. For one, it can be done through a regular brokerage account that’s held by a financial institution, giving the user added security and ease of use. For example, if you forget the password to a brokerage account, you can reset it — not so if you forget the key to your bitcoin wallet.

Still, it may not eliminate volatility, Jariwala said.  

Check out a cryptocurrency fund

It’s also possible to invest in funds that hold bitcoin and other cryptocurrencies, according to Doug Boneparth, CFP and president of Bone Fide Wealth in New York.

Right now, there are a few players that are creating bitcoin trusts, he said, pointing to companies such as Grayscale and Osprey that help retail investors navigate cryptocurrency.

“Buying it in a fund wrapper is probably more familiar to the retail investor than anything else,” he said. In addition, working with a fund means that you deal with the company that manages the fund for any account questions or information you need, such as setting a password, tracking gains and losses or gathering documents for filing your taxes.

The majority of people should be spending more time learning than buying.
Tyrone Ross
CEO of Onramp

Of course, those services do come with a cost — different funds will have different fees associated with them, which people should research before putting money into them, Bonaparte said.

And, people could also invest in funds that have exposure to cryptocurrencies and blockchain technology, such as the Ark Next Generation Internet exchange-traded fund, for example. The ETF has exposure to things such as artificial intelligence, big data, cloud computing and blockchain.

To be sure, some investors will still want to hold digital coins on their own. More than a quarter of Americans plan to invest in cryptocurrency this year, according to a February survey of more than 30,000 people conducted by Piplsay Research. In addition, half said they think investing in cryptocurrency is safe, according to the report.

If you would like to invest directly in bitcoin or another cryptocurrency, experts recommend learning as much as possible first, only investing an amount you’re comfortable losing and holding for the long-term.

“The majority of people should be spending more time learning than buying,” Ross said, referring to cryptocurrency.  

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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.

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