With over 560 million crypto users across the world, there’s a lot of excitement around the potential growth of this dynamic market. There’s increasing evidence that points to the market’s maturation as institutions are increasingly recognizing the long-term value of this asset class.
Bitcoin alone, which is the pioneering cryptocurrency, has had a striking market performance since its inception, and unsurprisingly, many people still buy it and continue to believe in its power.
But owning Bitcoin directly isn’t for the faint-hearted ones, as the market is volatile and involves many risks. Besides, it can be challenging to understand all its ins and outs.
The good news is that you can gain exposure to Bitcoin without the complexities and challenges of direct ownership. In this blog, we will explore 4 approaches you can consider if you want to benefit indirectly from the adoption of Bitcoin, so read on!
Bitcoin futures
Bitcoin futures are financial contracts that enable traders to speculate on the asset’s future price without the need to own it. The buyer and the seller must buy and sell Bitcoin at a predetermined price on a specific date in the future.
Traders choose btc futures because they can speculate on the price movement of the asset without owning it directly. With leverage, they can control significant positions with less capital, which can potentially amplify returns.
Futures enable traders to short cryptocurrencies, allowing them to profit even from falling prices. This can be very convenient in a volatile market where prices fluctuate in a very short time. Since Bitcoin futures have higher liquidity, traders can enter and exit positions more easily without massive price slippage, especially on larger exchanges.
Bitcoin options
Bitcoin options represent a type of derivatives contract that allows investors to speculate on market movements to make a potential profit.
In October 2024, the SEC approved the listing of options on spot ETFs, marking a massive development in the history of cryptocurrencies. This approval allowed institutional investors greater access to Bitcoin through more traditional financial products.
Options are valuable for diversification, hedging, and strategic positioning in a broader cryptocurrency portfolio, and their flexibility in strategy caters to complex and simple trading approaches alike. Unlike in crypto futures, which obligate the buyer and seller, in options, holders have the right but not the obligation to sell or buy crypto.
However, when considering Bitcoin options, it’s essential to remember that the market is still quite young and lacks the deep liquidity encountered in the mature options market. This can have a negative impact on price slippage, particularly when it comes to options with longer maturities.
Exchange-traded funds
Exchange-traded funds or ETFs provide an excellent option to gain exposure to Bitcoin without fully committing to it. Essentially, ETFs represent an investment fund holding different underlying assets, including bonds, stocks, or other securities.
With ETFs, investors can spread their risk across various assets instead of focusing on just one. Moreover, it’s possible to trade them on major stock exchanges, and due to this reason, they are highly accessible and easy to sell or purchase during market hours.
Recently, Bitcoin ETFs have seen a net inflow of $13.33 million, marking a massive rebound after a period of outflows, so now may be the right time to get started with them if you’re looking to participate in the market without directly handling digital wallets.
Just keep in mind that each ETF type comes with advantages and disadvantages, and you need to choose them based on your risk tolerance and individual investing strategy, to name a few.
Crypto stocks
You can also gain exposure to Bitcoin by investing in stocks of companies that provide crypto-related services or hold substantial Bitcoin reserves.
Many publicly traded firms provide indirect access to the crypto industry via their investments in digital assets or their operations. Tesla, for instance, has invested massively in Bitcoin, impacting the traditional and cryptocurrency markets alike.
Investing in publicly traded companies comes with regulatory oversight that offers a major layer of security for investors. This is because publicly traded companies are subject to firm regulatory frameworks that ensure financial reporting, transparency, and adherence to legal standards.
As a result, investors have a level of protection and confidence as the companies must comply with regulations and rules that the financial authorities have set. Of course, crypto stocks come with downsides, too, as company-specific factors affect their performance, ranging from operational efficiency, management decisions, and broader market conditions.
This adds a layer of complexity, requiring you to consider not just the prospects of the crypto industry but also the fundamentals of the individual companies.
What is the best way to buy Bitcoin indirectly?
To decide which method of buying Bitcoin indirectly works best for you, consider weighing their pros and cons and take into account your preferences, needs, and risk profile.
For instance, while Bitcoin futures are more suitable for experienced, speculative traders who are comfortable with margin calls and leverage and want to capitalize on short-term price movements, Bitcoin ETFs are aimed at those who seek to commit to cryptocurrencies over the longer term and are looking for simpler, regulated exposure to Bitcoin without the complexity of managing futures contracts.
The bottom line
Bitcoin presents a potentially lucrative opportunity for investors, but it requires a thorough understanding of the crypto market as well as a robust security approach. The regulatory uncertainties of the Bitcoin ecosystem, as well as the volatility, require a risk-aware investment strategy.
If you don’t feel comfortable buying Bitcoin directly, there are different ways to get exposure to it indirectly. Whether opting for Bitcoin ETFs, Bitcoin futures or options, or Bitcoin stocks, each avenue provides benefits and risks, so you want to explore them carefully and decide which one best suits you.
Ultimately, it’s essential to stay informed, assess the risks, and align your investment choices with your financial goals if you want to maximize your profits and set yourself up for success on your path toward wealth-building.
