Cryptocurrencies had a dream run from 2020 to 2021. However, in November 2021, when cryptocurrencies were at the pinnacle of the price charts, the Crypto Winter hit and reversed most of the gains registered that year. Despite this downturn, if you were to invest $10 in Bitcoin back in Jan 2020, you'd have close to $34 today – that's roughly 342 percent in total returns – as per Harun Invest's Bitcoin calculator.

Crypto markets are generally very volatile, and investing in them requires a significantly large appetite for risk. While the market volatility opens opportunities for making short-term gains, investors must also be able to stomach temporary losses if they wish to sustain themselves. However, if it seems like a risk you aren't ready to take, there are other ways to invest in cryptocurrencies without owning any directly. Here's how.

Invest in crypto holding companies:

This is a great way to limit your exposure to cryptocurrencies while still investing in them. Many publicly traded companies are involved in crypto investment activities as a part of their operating strategy. When you own shares of such companies, you become a stakeholder in that organisation with an indirect investment in cryptocurrency.

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According to the March 2022 filing of the 10-Q with the US Securities and Exchange Commission (SEC), electric car manufacturing giant, Tesla, holds $1.5 billion worth of cryptocurrency. The filing reveals that the fair value of the same stands at $1.96 billion presently. Investing in Tesla stock would mean that your exposure to Bitcoin is dependent on the company's exposure.

"When you're thinking about investing in a company because they have exposure to crypto, it really runs the gamut from how direct or indirect you are in terms of that exposure. It just depends on how much of their balance sheet is in crypto," said Douglas Boneparth, Financial Planner and President of New York-based Bone Fide Wealth, to The Beacon in 2021.

Invest in crypto-related businesses:

Besides looking at pro-crypto companies, you can also consider investing in crypto-related businesses. For instance, you could look at Marathon Digital Holdings (MARA), which is trying to create the largest Bitcoin mining empire in North America. Other good options suggested by NextAdvisor include Riot Blockchain (RIOT), Bitfarms (BITF), and Galaxy Digital (BRPHF).

Also Read: Now, Twitter 'creators' can get paid in cryptocurrency

You can also look at companies with blockchain infrastructure, such as Coinbase and other publicly traded crypto exchange stocks. Similarly, crypto payment firms like Block Inc can also be considered.

Exchange-Traded Funds (ETFs):

ETFs are baskets of stocks but function like a crossover of mutual funds and equities. Purchasing a unit of ETF gives you exposure to all the underlying stocks of that ETF.

ETFs can be focused on various industries and therefore contain varying combinations of stocks. You must pick one with the industries and sectors of your liking. If you are one of those people who believes in the future of blockchain technology, you can pick an ETF with pro-blockchain firms. Some good blockchain ETF options recommended by NextAdvisor are:

BLOK (Amplify Transformational Data Sharing ETF) – the largest blockchain ETF with holdings including PayPal, Square, and MicroStrategy

BLCN (Siren Nasdaq NexGen Economy ETF) – holds Square, Coinbase and Accenture

LEGR (First Trust Indxx Innovative Transaction & Process ETF) – holdings include Oracle, NVIDIA and Fujitsu.

You can also invest in a crypto ETF, if not an equity market ETF. Instead of following a stock market index, a crypto ETF tracks the price of a cryptocurrency. The Proshares Bitcoin Strategy ETF was the first crypto ETF approved by the SEC in October 2021. This ETF is linked to the Bitcoin price movement and does not directly invest in Bitcoin. Instead, it generates gains through Bitcoin futures contracts. However, it is currently at one of the lowest points since its inception.

As is with direct investment in cryptocurrencies, we recommend that you engage in thorough research and reading before indirectly deploying your hard-earned money into the crypto markets.

(Edited by : Jomy Jos Pullokaran)

First Published:Apr 26, 2022 10:29 PM IST