Investing in Bitcoin without actually purchasing it
Discover how to invest in Bitcoin using strategies like futures and exchange-traded funds (ETFs) that spare you from having to purchase the coin outright.
Although purchasing Bitcoin (BTC) directly may be the best way to realize all of its potential, this isn’t the best option for everyone. Thankfully, you can learn how to invest in Bitcoin without having to deal with the bother of physically acquiring and storing it thanks to a variety of financial products.
How to begin buying Bitcoin
You should follow a few simple steps before making any judgments about your Bitcoin investments. To begin with, in order to make an informed choice, it is imperative to gain as much knowledge as you can about Bitcoin, including its workings, possible advantages and disadvantages, and underlying technology.
In order to choose which investing strategy best meets your objectives, you also need to investigate the various options. Think about how you feel about taking on a risk and how much money you feel comfortable losing.
Additionally, stay informed about any regulatory changes that may have an impact on Bitcoin as well as the most recent advancements in the cryptocurrency field. Since market conditions are subject to sudden changes, being educated will help you make wiser investing choices.
Table of Contents
methods for making Bitcoin investments
Bitcoin mining
The process of creating new Bitcoins and validating and appending transactions to the blockchain is known as mining. Application-specific integrated circuits (ASICs), specialized gear and infrastructure made for mining cryptocurrencies like Bitcoin, usually demand a sizable upfront investment. These ASIC miners are designed to efficiently complete the required cryptographic computations.
Because it takes a lot of computing power to solve the puzzles, mining uses a lot of electricity. Investors must configure and set up their mining equipment once the necessary hardware and infrastructure are in place. This includes setting up cooling systems, configuring the mining software, and connecting the ASIC miners to a power source.
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For bitcoin mining to operate at peak efficiency and profit, constant observation and upkeep are necessary. This includes keeping an eye out for hardware problems, upgrading software, and fine-tuning mining settings as required.
For individuals, mining Bitcoin has grown less profitable, though. Large, scale-capable industrial miners now own the majority of the earnings. Because of the high cost of energy and the specialized gear required, home mining is not feasible for most individual miners.
Bitcoin ETFs and ETPs
A Bitcoin exchange-traded fund (ETF) may be one of the best ways to invest in Bitcoin for those who don’t want to purchase BTC directly. It is a Bitcoin investment vehicle that offers exposure to the price of BTC without actual ownership of the digital currency. A Bitcoin ETF tracks the value of Bitcoin through actual ownership of BTC or Bitcoin derivatives.
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In January 2024, the U.S. Securities and Exchange Commission (SEC) approved spot Bitcoin ETFs after numerous initial denied applications. After the approval, the crypto market saw a significant upsurge, with BTC shattering its previous all-time high.A Bitcoin ETP is an exchange-traded product with Bitcoin as an underlying asset. For institutional investors, buying Bitcoin ETPs could be considered less risky than buying BTC outright since ETPs are established investment vehicles that operate on traditional security exchanges and don’t require any technical crypto know-how on the investor’s part.
Bitcoin CFDs
A Bitcoin contract for difference (CFD) allows investors to speculate on the price of BTC fluctuating while using leverage to improve the size of their position. This means they don’t own the underlying digital currency but instead possess a CFD that tracks the price of Bitcoin.
When trading Bitcoin as a CFD, you are buying and selling the price behavior of financial products. This means you can benefit from the price fluctuations prevalent in the Bitcoin market.
Bitcoin futures and options
Bitcoin derivatives, such as futures and options, provide another option to add Bitcoin exposure to your portfolio. However, derivatives can be riskier than financial products tracking the spot price of Bitcoin, so they are only for experienced traders and investors.
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A Bitcoin futures contract is a derivative product that allows a buyer and a seller to exchange Bitcoin at a predetermined price and a specific date in the future, allowing them to speculate on the price of Bitcoin without having to hold the cryptocurrency. You can also use leverage to trade in future markets. Leverage allows you to trade Bitcoin futures without having to pay upfront for the full value of a contract.
Bitcoin options are derivatives contracts that allow the buyer to buy the digital currency at a certain price at a specific future date. Options offer an avenue to take advantage of price fluctuations and are typically cheaper than futures contracts, as you only have to pay the option premium to bet on the price of Bitcoin.
Bitcoin stocks
Finally, another way of investing indirectly in Bitcoin is by buying stocks in companies that are leveraging Bitcoin in their business. Examples would include tech companies, such as Microstrategy and Tesla, which hold a significant amount of Bitcoin on their balance sheets.
Companies operate under clear rules and structures, making them more understandable to the average investor. Investors in publicly traded companies have the right to see financial statements and are informed about decisions made by top executives.
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In March 2024, American tech company MicroStrategy, the largest corporate Bitcoin owner, announced it had purchased an additional 9,245 Bitcoins. The company’s Bitcoin holdings now exceed 1% of the total Bitcoin market, representing an unrealized profit of around $6 billion
Elon Musk’s Tesla still holds around $772 million in BTC, despite the fact that it sold some of its Bitcoin during market dips in 2021 and 2022.
Alternatively, some companies provide Bitcoin-related services, such as payment providers like PayPal. You can also invest in Bitcoin mining companies like Riot Blockchain and Marathon Digital Holdings.
With companies offering services other than holding Bitcoin, you also have to evaluate their products and overall sector performance. The stock’s performance will be affected by several factors that have nothing to do with the Bitcoin price. So keep that in mind when adding Bitcoin stocks to your portfolio.
- Bybit’s trading platform is easy to navigate, making it suitable for both beginners and experienced traders
- Bybit offers a range of advanced trading tools, including charting and technical analysis indicators, to help traders make informed decisions.
- Bybit has a high trading volume, ensuring that there is always enough liquidity for traders to enter and exit positions quickly.
