How do you invest in cryptocurrency?
Considering investing in cryptocurrency? While Bitcoin may be the most recognized digital currency, there are thousands of other cryptocurrencies in existence. Investment in cryptocurrency can vary, from purchasing coins directly to investing in crypto-focused funds and companies. To invest directly, cryptocurrencies can be acquired through exchanges, apps, or select broker-dealers. Learn more about how to invest in this innovative and emerging asset class.
Investing in Various Types of Cryptocurrencies
When considering cryptocurrency investment, the initial thought may be to buy and hold various crypto coins. Directly purchasing cryptocurrency is a prevalent method to incorporate crypto into your investment portfolio. However, there are several approaches to investing in cryptocurrency:
Direct purchase:
This involves buying and holding cryptocurrencies, ranging from well-established ones like Bitcoin and Ethereum to new, lesser-known coins.
Invest in cryptocurrency companies:
You can invest in companies with a partial or total focus on cryptocurrency. Your options include cryptocurrency mining companies, mining hardware makers, companies like Robinhood Markets Inc. (HOOD) and PayPal Holdings Inc. (PYPL) that support cryptocurrency, and many others with varying levels of crypto exposure.
You also can invest in companies like MicroStrategy Inc. (MSTR), which holds large amounts of cryptocurrency on its balance sheets.
Invest in cryptocurrency-focused funds:
If you don't want to choose among individual cryptocurrency companies, then you can decide to invest in a cryptocurrency-focused fund instead. You have a choice of exchange-traded funds (ETFs), such as index funds and futures funds, in addition to a range of cryptocurrency investment trusts. In January 2024, the Securities and Exchange Commission approved the first Bitcoin Spot ETFs. These funds hold bitcoin and offer shares to investors based on bitcoin spot prices.
U.S. Securities and Exchange Commission: "Statement on the Approval of Spot Bitcoin Exchange-Traded Products."
Investing in a cryptocurrency Roth IRA: If you're interested in investing in cryptocurrency while also taking advantage of the tax benefits offered by an individual retirement account (IRA), you might consider a cryptocurrency Roth IRA. Utilizing a crypto IRA provider can enhance the security of your cryptocurrency assets.
Becoming a cryptocurrency miner or validator is one of the most straightforward methods to invest in cryptocurrencies. By mining or validating within a crypto network, individuals can receive crypto rewards, which they may retain as investments or convert into other currencies.
