Best Places To Invest In Crypto: A Guide

There are several ways to invest in cryptocurrency, including buying crypto directly, investing in crypto funds and companies, or trading on the futures market. Crypto exchanges, such as Coinbase, Binance, and Kraken, offer the widest array of cryptocurrencies to buy and sell, while traditional brokers typically offer access to crypto futures and Bitcoin ETFs. It's important to note that investing in cryptocurrency is risky due to its volatile nature and evolving regulatory environment. Before investing, it's crucial to understand the fundamentals, potential risks, and applicable regulatory protections.

Crypto Exchanges

Traditional Crypto Exchanges

These platforms facilitate the buying and selling of digital assets based on daily market prices. They often charge fees for transactions. Some exchanges deal only in cryptocurrency, while others allow users to trade fiat currencies, like the US dollar, for cryptocurrencies like bitcoin (BTC). Traditional crypto exchanges are overseen by a third party (called an exchange operator), which helps to ensure that customer sign-up and trading runs smoothly. These platforms make it quick and easy to link your bank account or debit card to buy crypto. However, this ease of access usually comes with fees to the exchange operator, on top of the asset purchase. On many centralised exchanges, investors can buy and sell digital assets with both fiat currency and other cryptocurrencies.

Decentralised Crypto Exchanges

Decentralised crypto exchanges (DEXs) lack third-party oversight, are open source, and depend on peer-to-peer (P2P) trading. DEXs often require more technological skill and intimate knowledge of cryptocurrencies to use than centralised exchanges.

Choosing a Crypto Exchange

When choosing a crypto exchange, it is important to consider a variety of factors, including deposit/withdrawal limits, regional restrictions and regulations, and verification requirements. It is also important to be aware that some crypto exchanges are mobile-only, some require powerful, specialised computers, and that each has varying levels of security and associated fees.

Crypto Stocks

• Buy stock in cryptocurrency companies: Invest in publicly traded companies that are directly engaged with the cryptocurrency sector, such as crypto exchanges, crypto mining companies, and mining hardware manufacturers. Examples include Coinbase (COIN), CME Group (CME), Riot Platforms (RIOT), Marathon Digital Holdings (MARA), and Hut 8 Mining (HUT).
• Buy stock in companies that hold a lot of crypto: Gain indirect exposure to crypto by investing in companies with substantial cryptocurrency holdings on their corporate balance sheets. Some examples are Block (SQ), MicroStrategy (MSTR), Tesla (TSLA), and MassMutual (MCI).
• Invest in companies using blockchain technology to innovate: Own companies leveraging blockchain technology to innovate across various industries, such as technology, e-commerce, and banking. Some companies in this category include IBM (IBM), NVIDIA (NVDA), Amazon (AMZN), Alibaba (BABA), and JPMorgan Chase (JPM).
• Buy shares in publicly traded cryptocurrency funds: Invest in crypto funds, including exchange-traded funds (ETFs) and mutual funds. Examples of crypto ETFs include the Fidelity Advantage Bitcoin ETF (FBTC) and the Invesco Galaxy Bitcoin ETF (BTCO). A mutual fund that invests in Bitcoin futures is Fidelity's Bitcoin Strategy ProFund Investor Class fund (BTCFX).

Remember that the crypto market is highly volatile, and the industry's evolving nature, including regulatory changes, adds a layer of uncertainty. Thorough research and careful consideration of your investment goals and risk tolerance are crucial before investing in crypto stocks.

Crypto Funds

There are several types of crypto funds, including exchange-traded funds (ETFs), cryptocurrency investment trusts, and crypto-focused mutual funds. These funds provide exposure to a basket of cryptocurrencies or companies related to the crypto market. Some crypto funds invest directly in cryptocurrencies, while others invest in crypto-focused companies or derivative securities such as futures contracts.

ETFs are a popular option for investing in crypto. They trade on stock exchanges and can be bought and sold like stocks. The first Bitcoin spot ETFs were approved in January 2024, allowing investors to invest in Bitcoin without actually owning the coins. ETFs provide a more regulated and secure way to invest in crypto compared to buying coins directly.

Cryptocurrency investment trusts, such as the Grayscale Bitcoin Trust, allow investors to trade shares in trusts holding large pools of a specific cryptocurrency. These trusts can provide a simpler way to gain exposure to a particular cryptocurrency without dealing with the complexities of buying and storing the coins directly.

Additionally, crypto-focused mutual funds are also available. These funds typically invest in a mix of cryptocurrencies, crypto-related companies, and other assets. They provide a more diversified approach to investing in the crypto market and are often actively managed by fund managers.

When investing in crypto funds, it is important to consider the fees and expenses associated with these investment vehicles. Crypto funds may have higher fees compared to traditional funds due to the nature of the underlying assets. It is also crucial to assess the risks involved, as the cryptocurrency market is highly volatile and unregulated.

Overall, crypto funds offer a convenient and diversified way to gain exposure to the crypto market without needing to purchase individual coins directly. They can be a good option for investors who want to benefit from the potential upside of cryptocurrencies while reducing the risks associated with picking individual coins.

Crypto Wallets

Hot wallets are connected to the internet and are typically software-based. They can be downloaded as mobile apps or used as web or browser extensions. Examples include Coinbase Wallet, MetaMask, and Trust Wallet. Hot wallets are convenient for active traders as they provide quick access to cryptocurrencies. However, they are more vulnerable to cyberattacks and malware.

Cold wallets, on the other hand, are offline storage solutions. They can be hardware wallets, such as USB devices, or paper wallets, where private and public keys are written or printed. Examples of hardware wallets include Ledger Nano S Plus and SafePal. Cold wallets are more secure than hot wallets since they are not connected to the internet. However, they are less convenient for frequent transactions and may be physically stolen.

When choosing a crypto wallet, it's important to consider factors such as security, supported currencies, ease of use, and compatibility with hardware wallets. Additionally, active traders may benefit from having both hot and cold wallets, using the former for frequent transactions and the latter for long-term storage.

Crypto ETFs

Crypto exchange-traded funds (ETFs) are a popular way to gain exposure to cryptocurrencies. ETFs are available that provide exposure to spot cryptocurrencies, cryptocurrency futures contracts, and companies focused on servicing the cryptocurrency market.

Some of the most popular Crypto ETFs include:

• ARK 21Shares Bitcoin ETF (ARKB)
• Fidelity Wise Origin Bitcoin Fund (FBTC)
• Grayscale Bitcoin Mini Trust (BTC)
• Bitwise's Bitcoin ETF (BITB)
• Franklin Templeton Digital Holdings Trust (EZBC)

It is important to note that investing in cryptocurrencies and Crypto ETFs is considered a speculative investment with high risk. The prices of cryptocurrencies are highly volatile, and investors could lose their entire investment.

Frequently asked questions