Top 4 Indirect Bitcoin Investment Strategies You Could Use Without Buying Crypto

Key insights

• Cryptocurrency investing may be popular, but it is a relatively new topic with a significant amount of learning to do.
• Some people find that investing in cryptocurrencies by purchasing Bitcoin directly is challenging due to its volatile nature.
• There are various methods available to profit from an indirect Bitcoin investment.
• Bitcoin futures, exchange-traded funds, and crypto stocks are among the popular alternative ways to invest in Bitcoin without purchasing it outright.

Buying and selling Bitcoin directly has long been the most popular form of investment and most traders have made fortunes from it. However, some investors find it not ideal. This guide explores a number of alternative methods to invest in Bitcoin without purchasing the digital asset.

Suppose you want to invest in Bitcoin and take advantage of its potential, but you don’t want to do it directly. In this case, you can use several alternative financial products to forget about the hassle of purchasing and storing the asset. Among the indirect Bitcoin investment options available, they do not require purchasing the cryptocurrency or opening an account on a cryptocurrency exchange. Each of these alternative methods has its unique features, advantages, disadvantages, and costs that you need to consider before choosing one of these methods.

What is an indirect Bitcoin investment?

Indirect Bitcoin investing uses traditional Bitcoin investment strategies such as mutual funds, stocks, and ETFs. Alternative crypto investment methods are relatively cheaper and potentially less risky than purchasing Bitcoin directly. The following ways are some of the most popular ways to invest in Bitcoin without purchasing it directly.

Bitcoin ETFs and ETPs

If you want to avoid buying, Bitcoin exchange-traded funds (ETFs) are among the most popular ways to invest in Bitcoin. Also known as a Bitcoin exchange-traded product (ETP), the investment vehicle allows you to gain exposure to the price of Bitcoin without directly purchasing it or owning the cryptocurrency. Bitcoin ETFs track the value of BTC through ownership of Bitcoin derivatives. The product gained popularity in January 2024 after the US Securities and Exchange Commission (SEC) approved spot Bitcoin ETFs, after which Bitcoin broke all previous price records. Since then, many institutional investors have adopted Bitcoin ETPs because purchasing them is less risky for them than buying Bitcoin directly. Additionally, you do not need any technical crypto knowledge to invest in a crypto ETF.

Bitcoin CFDs

A Bitcoin contract for difference (CFD) is an indirect Bitcoin investment tool that allows you to speculate on the fluctuations in the price of Bitcoin while using leverage to increase the size of your position. You don’t have to own the underlying cryptocurrency, meaning the CFD tracks the price of Bitcoin on your behalf. Trading Bitcoin as a CFD involves buying or selling BTC’s price behavior to increase your chance of profiting from the asset’s price fluctuations. However, keep in mind that trading Bitcoin CFDs, like futures, involves leverage, which increases the potential profit or loss you can make. High leverage increases the risk of a margin call, in which the investor must increase the amount of funds deposited to mitigate potential losses or risk having their position forcibly closed.

Bitcoin futures and options

Bitcoin derivatives such as futures and options are another indirect Bitcoin investment method that you can use to add BTC exposure to your portfolio.

Bitcoin futures contracts are derivative products that allow buyers and sellers to exchange BTC at specified prices on specified dates in the future. This allows users to speculate on the cost of an asset they do not own or hold. Users can also use leverage to trade on the futures market. Leverage allows an investor to trade Bitcoin futures without paying the total value of the contract upfront.

On the other hand, Bitcoin options are derivative contracts that allow an investor to purchase a cryptocurrency at a pre-agreed price on a specific date in the future. The options offer traders the opportunity to profit from price fluctuations. They are usually cheaper than futures contracts because the investor only has to pay the options premium to bet on the price of BTC.

Bitcoin stocks

Bitcoin stocks offer another indirect Bitcoin strategy you can consider. The method involves purchasing stocks of companies that use Bitcoin in their business. Leading companies include Tesla and MicroStrategy, which hold huge amounts of Bitcoin on their balance sheets. Such companies operate and set terms and conditions that make investing in them accessible to the average investor.

You could also buy stocks in other companies that offer Bitcoin-related services or Bitcoin mining, such as PayPal and Riot Blockchain. However, if you work with companies that offer other services besides crypto, you should carefully evaluate their various products to assess their overall performance, as the performance of their stocks is influenced by many other factors besides the BTC price.

Diploma

It would be helpful if you remembered that the cryptocurrency market remains notoriously volatile regardless of whether you make a direct or indirect Bitcoin investment. Prices can fluctuate significantly in the short term. There is no doubt that this volatility creates opportunities for winning. However, the downside is that it can also put you at risk of significant losses. Therefore, every investor must remain vigilant, prepare for price fluctuations and implement a risk management strategy to mitigate the associated risks. As usual, it is important that you do your own research (DYOR) on any indirect Bitcoin investment method you wish to use and learn about their unique risks and profit potential.