U.S. crypto ETFs, for instance, park some of their funds with U.S. Treasury and money market instruments. “As such, these ETFs might not reflect the actual price trend during sharp volatile moves or times of market distress,” he notes.
Investing in crypto technology
Another indirect way to gain cryptocurrency exposure is by investing in companies involved in crypto-related technology, such as blockchain, crypto mining or cross-border transactions.
Notable companies in this space include Riot Blockchain (RIOT), Marathon Digital (MARA), MicroStrategy (MSTR) and Hut 8 Mining (HUT). The performance of most of these stocks, in terms of value, closely correlates with underlying trends in cryptocurrency markets. “One of the biggest rewards for gaining exposure through such stocks is their lower price value when compared to large-value cryptos such as bitcoin and ethereum,” says Mamtani.
Investors can also consider publicly traded companies whose technology is related to blockchain or coin trading. In addition, financial payments companies such as PayPal and(formerly Square), which was founded by Twitter’s co-founder and former chief executive officer, Jack Dorsey, allow users to trade select cryptocurrencies on their platforms.
Alternatively, “you could invest in an ETF that invests in blockchain, one of the key underlying technologies that is powering crypto,” says Chen. These ETFs provide exposure to multiple companies that use, invest in, develop or benefit from blockchain technology. Examples include First Trust Indxx Innovative Transaction and Process ETF (LEGR), Siren Nasdaq NexGen Economy ETF (BLCN) and Amplify Transformational Data Sharing ETF (BLOK).
Good ol’ trusts
It’s also possible to gain crypto exposure through trust funds. The U.S.-domiciled Grayscale XRP Trust, Grayscale Bitcoin Trust and Osprey Bitcoin Trust are a few examples of crypto-themed trusts that tie your portfolio to digital assets without direct ownership.
However, these trusts require a minimum investment ranging from US$25,000 to US$50,000, which some investors may find prohibitive.
Further, there is the risk of dislocation between the trust’s performance and crypto prices. “There could be an instance where the actual stock value or the fund value trades at a discount to underlying crypto,” says Mamtani.