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5 Ways to invest in crypto without holding any

By Angelique Ruzicka

16:04, 8 November 2021

Pile of cryptocurrency tokens
You can invest in crypto without buying any - Photo: Shutterstock

It’s difficult to predict which digital coins will do well and which ones could go under because the value of a cryptocurrency is often driven by speculation. What’s more, the founders behind some of these cryptocurrencies (like bitcoin) remain mysteriously anonymous.

If the volatility and mystery of cryptocurrencies make you nervous, then the obvious thing to do is to avoid them completely. However, if you’re still intrigued by the world of digital coins, there are ways to gain exposure to them without the huge risks.

  1. Tracker funds

Exchange Traded Funds (ETFs) that track the performance of cryptocurrencies have launched in the US but are not yet available Europe or the UK at the time of writing. But it’s bound to come across the pond sometime soon given the popularity.

“Crypto ETFs have caught fire recently, with the US finally greenlighting a futures BTC ETF. With an ETF, you are investing in a portfolio that contains a particular crypto (BTC. ETH etc.) among other assets, without directly investing in the crypto itself,” explains Marie Tatibouet, CMO at global blockchain asset exchange platform, Gate.io.

But even ETFs come with a warning label. “The ProShares Bitcoin Strategy ETF states that it does not 'invest directly' in bitcoin. But that doesn't mean it has no exposure to bitcoin. The ETF has expressly warned investors that 'they should be prepared to lose the entire investment,” says Kunal Sawhney, CEO of equities research firm, Kalkine Group.

  1. Listed companies that invest in crypto

You can invest in companies that have crypto interests. These include Tesla, MicroStrategy or Coinbase, which allows users to buy and sell cryptocurrencies and holds a $500m crypto portfolio. Facebook is also backing cryptocurrency, Diem, which will launch soon.

A better investment strategy is investing in listed companies like MicroStrategy and Tesla that are betting on Bitcoin or blockchain. Jack Dorsey's Square, a payments firm, has lately reported a whopping $1.8bn bitcoin revenue in the third quarter.

“MicroStrategy holds Bitcoin that the company bought for nearly $3.1bn, and the value of this holding is presently nearly $7.5bn,” points out Sawhney.

  1. Cash back

Companies like Wirex and Uphold have launched crypto debit cards that allows you to pay for goods and services in any currency - including crypto.

With Wirex, each time you pay for something online or in store you get 2% crypto cash back - regardless of what currency you paid with. You can always exchange these cash back rewards if you feel nervous holding onto them. Alternatively, you can earn interest off your crypto.

“You can then use that crypto and put in a Wirex X-account, which earns up to 12% interest compounded daily, more than 100 times the national rate,” says Pavel Matveev, CEO of Wirex.

US100

19,856.10 Price
-2.640% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 1.8

Gold

2,457.01 Price
-0.480% 1D Chg, %
Long position overnight fee -0.0196%
Short position overnight fee 0.0114%
Overnight fee time 21:00 (UTC)
Spread 0.30

BTC/USD

64,601.70 Price
-0.240% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

XRP/USD

0.62 Price
+5.810% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168
  1. Alternative savings accounts

Public Mint, which describes itself as the first fiat-native public blockchain and frictionless money system, says it is launching an alternative savings account. It’s Earn program, which is currently in beta launch, will offer up to 6-8% in interest on savings.

Users invest money through an app into Public Mint’s US dollar wallet, which they say acts like a checking account. The money is then invested across a portfolio of CeFi (centralised finance) and DeFi (decentralised finance) companies.

“The Public Mint Wallet functionality already allows users to send money to other individuals, companies or applications with virtually no wait time or fees,” says founder and executive chairman, Halsey Minor.

“With Earn, we are expanding what users can do with their funds on the platform. We’re one step closer to achieving our mission of empowering the crypto community to take control of their finances by making DeFi simpler and more accessible.”

  1. Invest in solar

South African based Sun Exchange is a global solar leasing platform, which allows anyone from around the world to own and earn an income from solar cells installed in projects in emerging markets.

Investors can lease solar cells and earn a monthly income into Sun Exchange wallets, through its integration with the Luno bitcoin exchange, in the local currency of the project (typically South African Rand) or in bitcoin.

The company says it currently has 45 funded projects with 25,000 members from 180 countries.

Ensure your money is protected

Not all of these companies or services are available in the UK and Europe just yet and not all have a track record that can be studied. “They will come, as will ETFs that invest in Bitcoin miners, ETFs that offer a ‘fund of funds’, funds that invest in NFT backed assets, etc. However, even when available it will take time to demonstrate an alpha track record,” says Katharine Wooller, managing director of cryptocurrency exchange, Dacxi.

It’s important to check if your money is protected by authorised agencies or regulators before you invest. If it’s not protected by the likes of the US’ Federal Deposit Insurance Corporation (FDIC) or the UK’s Financial Conduct Authority (FCA) you are putting your savings at risk if a company goes bust.

Read more: Ethereum price prediction: Can ETH sustain its latest rally?

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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