If you’re looking to invest in cryptocurrencies, you can purchase bitcoins, Ethereum, or other altcoins. However, there are indirect ways of investing in the crypto world which may be cheaper and less risky. Here’s what you need to know if you want to invest in crypto without buying crypto.

What Is Indirect Crypto Investing?

If you don’t want to open an account on a crypto exchange and buy cryptocurrencies, you have options. You can invest in cryptocurrency indirectly through traditional methods like stocks, mutual funds, and exchange-traded funds (ETFs), thereby gaining exposure to cryptocurrency.

There are pros and cons to consider, including security, fees, and the risk of losses. When you buy cryptocurrency through third parties, they are going to make money somehow, so you should consider any additional costs when deciding whether to buy crypto using an indirect method.

Ways to Invest Indirectly in Crypto

Here are some ways you can invest in crypto indirectly.

Crypto ETFs

When trying to get broad access to a particular asset class, the first port of call is usually an ETF. ETFs can be found that track pretty much everything, from gold to the S&P 500. Unfortunately, with cryptocurrency, it’s a little more complicated.

The Securities and Exchange Commission (SEC) has denied spot cryptocurrency ETFs applications, saying none of the applicants thus far have verified how they would safeguard investors from market manipulation. However, the regulator has given the green light to ETFs that own future contracts tied to bitcoin’s price. Examples include the ProShares Bitcoin Strategy ETF (BITO), Valkyrie Bitcoin Strategy ETF (BTF), VanEck Bitcoin Strategy ETF (XBTF), and Global X Blockchain & Bitcoin Strategy ETF (BITS).

There are catches to investing in crypto this way. First, futures contracts don’t necessarily deliver the same returns as their target assets. Second, ETFs for complex and niche products, such as those related to crypto, can have fees that eat into your potential returns.

Crypto Closed-End Funds or Trusts

Investing in a closed-end fund or trust is another option for those seeking indirect means of speculating in crypto. Grayscale Bitcoin Trust (GBTC) is the best-known in this category. GBTC tracks the bitcoin market price and can be bought from most investing accounts.

One problem with trusts like GBTC is that they tend to cost more than ETFs. Another is that their prices don’t always align with the cryptocurrencies they own.

Regulatory issues have meant that GBTC shares trade at a discount to bitcoin. The trust also carries a 2% expense ratio. It’s basically charging 2% for buying bitcoin and holding it in a wallet in your name. You can do that yourself, of course, without paying that fee.

GBTC’s Bitcoin-related shares are not the only option. The company, which says it’s the world’s largest crypto asset manager, also offers other crypto-related investments and other crypto funds like Osprey Bitcoin Trust.

Cryptocurrency and Blockchain Stocks

If you want to buy a stock that exposes you to crypto, you can choose among companies that work in blockchain and those that invest in or hold cryptocurrency on their balance sheets.

Companies specializing in blockchain technology are often involved in crypto mining, software development, and other blockchain-based services. Notable stocks include Riot Blockchain (RIOT), Canaan (CAN), HIVE Blockchain Technologies (HIVE), and Bitfarms (BITF). These companies have different risk and reward tradeoffs than those directly invested in cryptocurrencies, often highlighting a diversified set of offerings within the wider crypto sector.

Alternatively, some companies hold cryptocurrencies directly. Coinbase (COIN) is one of the largest and most recognized cryptocurrency exchanges and stocks.

Generally, when there is a downtrend in crypto prices, the related stocks also struggle. This volatility is just one of the risks inherent in this sector, a key point to remember when exposing your portfolio to crypto-related products. Given the rapid changes in cryptocurrency regulations and market moves, it's prudent to consider diversifying your portfolio to guard against risk and consult a trusted financial professional if you have any doubts about your investment plans.

Crypto and Your 401(k) 

You may be able to invest a part of your retirement funds in cryptocurrencies with minimal effort. In 2022, Fidelity said that clients will be given the chance to add bitcoin to their 401(k) accounts. Fidelity will buy the coins on their behalf and hold them in a digital assets account.

This move is a major step toward bringing cryptocurrencies fully within the mainstream through traditional retirement investment portfolios. The option may be available for you, though it’s up to your employer to decide.

Bonus tip: Credit Card Rewards

Credit card rewards are one final method to fill your cryptocurrency portfolio without opening your fiat wallet. Several cards allow you to earn crypto when you swipe, tap, dip, click, or do anything else to use a credit card for payment.

Examples of cryptocurrency credit cards include the BlockFi Rewards Visa Signature card, Gemini Credit Card, and Upgrade Bitcoin Rewards Visa card. The Crypto.com exchange and Coinbase also feature a rewards card offering.

Some cards, like the Venmo credit card, offer flexible redemption options, including cryptocurrency. When you earn crypto as a credit card reward, you invest in crypto without buying crypto. Even if it goes down in value, you didn’t pay for the crypto, so everything you earn is like any other credit card points system.

The Bottom Line

Investing in cryptocurrency directly requires getting set up on an exchange and finding ways to store your digital coins safely. It can also mean potentially having a lot of money tied up in just one asset that is very volatile.

Fortunately, there are alternatives. You can invest in cryptocurrencies indirectly through ETFs that own future contracts tied to currency prices, specialist closed-end funds or trusts, or by buying shares in companies involved in cryptocurrency mining, software development, and other services. Alternatively, you can consider a credit card with cryptocurrency rewards or see if your employer offers this asset class through your 401(k).