Invest In Bitcoin: Avoid Startup Fees And Get Started

Investing in Bitcoin can be daunting, especially with its high volatility and unpredictability. However, there are several ways to invest in Bitcoin without purchasing it directly. Here are some methods to consider:

- Bitcoin stocks and funds: Several publicly traded companies, such as MicroStrategy, Square, and Tesla, have heavily invested in Bitcoin. You can also explore Bitcoin exchange-traded funds (ETFs), which hold a basket of stocks associated with Bitcoin, providing diversified exposure to the crypto industry.

- Investing in Bitcoin mining companies: Mining companies are responsible for validating transactions and adding them to the blockchain. By investing in these companies, you can indirectly benefit from Bitcoin's increasing value.

- Investing in Bitcoin futures: Bitcoin futures allow investors to bet on Bitcoin's future value without owning any BTC. Futures contracts enable investors to buy or sell BTC at a predetermined price on a future date.

- Investing in blockchain technology companies: Blockchain technology is the foundation of Bitcoin and other cryptocurrencies. By investing in companies that specialise in blockchain technology, you can indirectly invest in Bitcoin and benefit from its potential applications beyond cryptocurrency.

- Investing in Bitcoin derivatives: Bitcoin derivatives, including options, futures, and swaps, allow investors to place bets on Bitcoin's future price without owning any BTC. These instruments can be used for hedging or speculation.

- Investing in Bitcoin-related businesses: Many businesses, such as online retailers, restaurants, and real estate companies, accept Bitcoin as a form of payment. By investing in these businesses, you can gain indirect exposure to Bitcoin.

It is important to remember that all investment options come with risks. Before making any investment decisions, be sure to research and consider your financial goals and risk tolerance. Regulatory changes and technological advancements can also impact the profitability of these investment methods.

Bitcoin stocks and funds

There are several ways to gain exposure to Bitcoin without directly purchasing the cryptocurrency. Here are some options for investing in Bitcoin stocks and funds:

Bitcoin Exchange-Traded Funds (ETFs)

Bitcoin ETFs are investment vehicles that trade on the stock market. These funds invest directly in Bitcoin or in derivatives such as futures and options. ETFs offer a simple way to gain exposure to Bitcoin without the need to set up a cryptocurrency wallet or navigate unregulated crypto exchanges. Examples of Bitcoin ETFs include:

• Grayscale Bitcoin Trust (GBTC)
• IShares Bitcoin Trust ETF (IBIT)
• Invesco Galaxy Bitcoin ETF (BTCO)
• Bitwise Bitcoin ETF (BITB)
• ProShares Bitcoin Strategy ETF (BITO)

Traditional Stockbrokers

Some traditional stockbrokers offer their customers the ability to buy and sell Bitcoin. For example, Robinhood was the first mainstream investment broker to offer Bitcoin trading. Other options include Webull, TradeStation, and Fidelity.

Bitcoin Closed-End Funds or Trusts

Closed-end trusts, such as the Grayscale Bitcoin Trust, offer a way to invest in Bitcoin without directly purchasing the cryptocurrency. These trusts hold Bitcoin and other cryptocurrencies and trade on public exchanges.

Bitcoin Options and Futures

Derivative products allow investors to trade claims on the price of Bitcoin rather than buying it outright. Bitcoin futures contracts, for instance, allow investors to buy or sell Bitcoin in the future at a predetermined price. Bitcoin options give investors the right to buy or sell Bitcoin at a specific price within a certain time frame.

Companies with Exposure to Bitcoin

Another way to gain exposure to Bitcoin is to invest in companies that hold or trade Bitcoin or support Bitcoin infrastructure. For example, Coinbase, a publicly traded crypto exchange, generates revenue through trading fees, which tend to increase when Bitcoin is performing well. Mining companies such as Hut 8 Mining and Riot Blockchain also tend to rise and fall with the performance of Bitcoin.

Bitcoin mining companies

Some Bitcoin mining companies are powered by renewable energy sources, such as CleanSpark, which uses wind, solar, nuclear, and hydro energy. Other companies, like Bitfarms, use hydroelectricity to power their farms.

If you want to invest in Bitcoin mining companies, you can do so through traditional brokers like Robinhood, Webull, TradeStation, and Fidelity.

Bitcoin futures

Futures are a type of derivative contract that obligates two parties to exchange an asset or a cash equivalent at a predetermined price on a future date. When investors buy and sell Bitcoin futures contracts, they speculate about BTC's future price. In other words, they bet on whether the BTC price will increase or decrease. If their prediction is wrong, they pay the other party a cash settlement.

Each Bitcoin futures contract represents 5 BTC and is quoted in US dollars per one bitcoin. The contracts are traded on the Chicago Mercantile Exchange (CME), which introduces new monthly contracts for cash settlement. The CME offers monthly BTC futures contracts for six months and additional quarterly contracts for each of the four upcoming quarters.

The Benefits of Bitcoin Futures

Risks of Bitcoin Futures

Bitcoin and bitcoin futures can be highly volatile. The leverage created by futures contracts can significantly amplify both gains and losses. Additionally, Bitcoin futures traders are subject to margin calls, exchange fees, and other expenses, which can affect trading profits. If traders cannot maintain minimum margin requirements in their accounts, they may be forced to liquidate their positions at a loss.

"Spot" ETFs track the current price of Bitcoin, while Bitcoin futures ETFs are based on the value of short-term bets on the future price of Bitcoin. The US Securities and Exchange Commission (SEC) has repeatedly denied applications for spot ETFs, citing the inherent manipulability of the Bitcoin market. However, the SEC has approved several Bitcoin futures ETFs, as they can be structured to provide greater consumer protection.

Blockchain technology companies

Blockchain technology has been around for about a decade, but it is still in its early days in terms of real-world implementation. However, it has the potential to become a major part of finance, technology, and other industries.

OpenXcell

OpenXcell is a top blockchain development company that builds innovative blockchain-based apps and services. The company has a diversified clientele, including John Hopkins University, Renault-Nissan-Mitsubishi Alliance, Cin 7, and Ajman Bank.

SoluLab

With over 1500 completed projects and 500 happy clients, SoluLab is a leading blockchain developer in the US for building blockchain games, Ethereum tokens, Web 3.0, and DeFi solutions.

Infograins

Infograins is among the top blockchain development companies, providing core, custom, and enterprise blockchain technology solutions. The company holds expertise in developing Web 3.0 applications, Metaverse, POC development, public and private blockchain, and smart contracts.

Tech Alchemy

Tech Alchemy is an award-winning software design and development agency based in Shoreditch, London. They work with a mix of large organizations, brands, and ambitious startups to create innovative solutions.

IBM

IBM is a cloud platform and cognitive solutions company and is the largest company in the world embracing blockchain. IBM has helped more than 220 businesses develop blockchain applications and data governance tools.

Ava Labs

Ava Labs operates a next-generation blockchain platform called Avalanche, which offers customizable public and private blockchains at low costs. Ava Labs also provides solutions for individuals, such as an NFT and crypto wallet extension, asset wallet, and subnet explorer.

Coinbase

Coinbase is a digital portfolio that enables users to buy and sell cryptocurrency. The company's technology simplifies the process of buying and managing cryptos with features like recurring purchases and vault protection. Since 2012, Coinbase has facilitated over $300 billion in transactions for more than 98 million people.

Blockdaemon

Blockdaemon is an independent blockchain infrastructure platform that allows users to make transactions, stake, and earn cryptocurrency via nodes within a single interface. The company's platform is used by blockchain networks like ETH 2.0, Bitcoin, Solana, and Terra.

Chainlink

Chainlink is a Web3 services platform that makes it easy for developers to build their own Web3 applications. Its technology connects real-world data and computation with blockchains, making different blockchains interoperable with each other.

Anchorage Digital

Anchorage Digital is a platform that offers custody, trading, and financing services, primarily through cryptocurrency. The platform allows institutions to engage with crypto directly and integrate it into their products and services. Anchorage also offers staking and governance options.

These companies are at the forefront of blockchain technology, and their solutions have the potential to revolutionize various industries, including finance, cybersecurity, and supply chain management.

Bitcoin derivatives

Derivatives are tradable financial contracts that derive their value from an underlying asset. In the case of Bitcoin derivatives, the underlying asset is Bitcoin. Derivatives allow investors to gain exposure to the price movement of Bitcoin without actually owning it.

The two main types of crypto derivatives are futures and options contracts. A futures contract is an agreement between a buyer and a seller to buy or sell an asset (in this case, Bitcoin) at a specific price and date in the future. For example, if the current price of Bitcoin is $40,000, an investor can buy or sell futures contracts in anticipation of either a price decline or an increase. If the price of Bitcoin increases to $60,000 by the time the contract closes, the buyer will make a profit. On the other hand, if the price drops to $30,000, the buyer will incur a loss.

Options are another type of derivative contract that allows a trader to buy or sell Bitcoin at a set price and date in the future. Unlike futures, options give the buyer the opportunity to choose not to buy the asset. There are two types of options: call options and put options. Call options allow a trader to purchase Bitcoin at a given price and date, while put options allow a trader to sell Bitcoin at a given price and date.

Perpetual futures, or perpetual contracts, are a special type of futures contract unique to the crypto market. Unlike regular futures, perpetual futures do not have an expiry date. Traders can hold these contracts for as long as they wish until they close the position or are forced to liquidate due to margin issues.

Crypto derivatives are important because they help increase liquidity in the market, protect portfolios from unexpected risks due to high volatility, enable portfolio diversification, and optimize price discovery. They are also used for hedging and speculation. Hedging involves opening positions that are negatively correlated with your existing positions to protect your portfolio from potential losses. Speculation involves betting on the future price of Bitcoin and taking long or short positions accordingly.

While derivatives offer several benefits, there are also some disadvantages to consider. Derivative contracts can be very volatile due to the frequent fluctuations in the value of underlying assets. Additionally, derivatives trading remains illegal in some regions, and over-the-counter futures contracts involve counterparty risks due to a lack of due diligence.

Frequently asked questions