Cryptocurrencies are inherently cryptic — it’s right there in the name. And if you follow Warren Buffett’s advice to never invest in businesses you can’t understand, it may be hard to justify investing in a currency made of math instead of gold.
But it’s also hard to ignore some cryptocurrencies’ astounding performance : The price of one bitcoin jumped from just under
The excitement surrounding digital currency may leave some investors feeling like the lonely kid at the pool party, wanting to join their friends having fun in the deep end, but too nervous to jump in.
For those investors who are cautiously curious, here are ways to gain exposure to cryptocurrency without buying it, and if you do decide to purchase, how to lower your risk.
INVEST IN COMPANIES WITH CRYPTOCURRENCY HOLDINGS
Think of this strategy as cryptocurrency investing once removed. Some publicly traded companies have cryptocurrency holdings. And because they are betting on its success, you can too, with those companies acting as a buffer.
“When you’re thinking about investing in a company because they have exposure to crypto, it really runs the gamut from how direct or indirect you are in terms of that exposure,” says
Checking a company’s balance sheet can be revealing: As of
INVEST IN CRYPTOCURRENCY INFRASTRUCTURE
Another way to gain exposure is to invest in companies that have a stake in the cryptocurrency industry.
“Just like you have with gold, you can either invest in the commodity itself or the infrastructure around it, the miners, the materials needed for mining, same with energy and oil,” Boneparth says. “And there are public companies that are specifically operating in the blockchain space, but there’s not many of them.”
GET READY FOR A CRYPTOCURRENCY ETF
While there are currently no cryptocurrency exchange-traded funds that have been approved by the
“There’s been many different attempts at ETFs and many of these have been rejected. There are ETFs in other countries for bitcoin that have been permitted, and I think it’s just a thing that will happen in time,” says
There have been numerous applications for cryptocurrency ETFs, and the
USE CAUTION IF INVESTING DIRECTLY
If you’re willing to invest in cryptocurrency directly, there are a few ways you can mitigate your risk. One way to do this is to reduce the amount of money you invest. Some credit cards offer cryptocurrency rewards in a similar way as cash back or miles. If you decide to add cryptocurrency to your portfolio by way of rewards, you don’t even have to use your own dollars to do so.
Another way to reduce your risk is to invest in stablecoins, which are similar to traditional cryptocurrencies but are backed by real-world assets, making them less prone to significant drops in value.
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This article was provided to The Associated Press by the personal finance site
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