5 Ways to invest in crypto without holding any
16:04, 8 November 2021
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.
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.
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.
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.
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.”
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.