Let’s say you want to invest in cryptocurrencies but you do not want the risk exposure of buying one or two cryptos directly.
More importantly there is no way of knowing which cryptocurrency will survive. You could take your money and spread it around to the top 10, but the problem is that there is over a dozen cryptocurrencies.
So how do you invest in a new type of currency that is sure to be around for the long haul but are unsure of where to place your funds?
Well, in this article, we will provide you 4 ways you can get involved with purchasing cryptos without taking on too much risk.
#1 – Invest in ETFs
ETFs are always a great way to diversify your holdings without having to manage several securities. To this point, instead of investing in a batch of cryptos, what about investing in the companies that support the technology.
To this point,Amplify has created a few blockchain based ETFs. Now these ETFs do not follow any cryptocurrency directly, like the SPY follows the S&P 500.
The Amplify ETFs invest in the companies that support blockchain technology.
This way as cryptocurrency popularity increases, you the investor will benefit on the rise of the companies supporting this cutting-edge technology.
#2 – Create Your Own Crypto ETF
Similar to what the folks have done over at Amplify, you can create your own blockchain ETF.
So, where do you find these blockchain focused stocks? Well, performing a quick google search will yield some quick results.
But, you have to decide quickly how you want to balance your portfolio. There are several small-cap blockchain related stocks with market caps under 20M that could be more of a homerun shot for you.
Then there are a large number of big players that you may have never thought would be in the blockchain space.
These large cap companies include IBM, Hitachi, Overtstock. com and Accenture just to name a few.
Each one of these companies are using blockchain in different ways; some as service providers while others are using blockchain technology as a means to grow their business.
You can then use a service like Motif to create an ETF with your own personally selected batch of stocks.
The one challenge you will face with creating your own fund is that it requires work. You will be responsible for checking the performance of each stock and tracking their exposure to blockchain technology.
You will also be responsible for staying on top of any new plays in the space to ensure you are constantly hopping on the next wave of hot blockchain related stocks to reap the rewards of each surge higher in the overall crypto market.
#3 –Index Fund
You want to be a little closer to cryptocurrencies, but not go through the process of selecting individual currencies.
Well try out Coinbase’s new Index fund that creates a portfolio of cryptocurrencies for you to invest. The fund is not cheap, as it requires a $10,000 minimum investment.
The fund is made up of Bitcoin, Ethereum, Bitcoin cash and Litecoin.
This fund is Coinbase’s first attempt at asset management and they are doing a pretty good job with this fund.
Going back to 2015, the fund is up a whopping 4,900 percent according to their website where the index is tracked.
The benefit of the index fund is you can literally fire and forget. Coinbase will reallocate assets against the best performing cryptocurrencies.
You could treat the crypto market like a long-term investment with a five year or greater window.
This way you can avoid getting caught in all the noise of the current trading activity and focus on the bigger picture.
# 4 – Betting Against Cryptocurrency
Most articles on the web talk about how to invest directly in Bitcoin with the hopes of the currency appreciating over time.
But you are a trader and should look to make money when the market goes up or down.
To this point, shorting the Bitcoin craze is one way of making a profit when the currency has the fallout correction as many bears are predicting.
The most outspoken short seller in the space is Andrew Left.
Andrew has taken a short position against the Bitcoin Investment Trust (GBTC).
Andrew is betting on the fact that since one share of the GBTC only represents .09 bitcoin, that the fund should not have soared 1,200 percent in 2017.
Now if you plan on shorting Bitcoin, you will need a hedge, because the security is truly in unchartered territory and it’s anyone’s guess how this is going to shake out.
You can pick up Bitcoin futures contracts long to hedge the risk if the cryptocurrency continues to scream higher as some speculate.
In Summary
There are so many ways of investing in the crypto market without buying one currency outright. Again, with the extreme volatility in the crypto market, it’s best to have a longer-term view for this investment.
Al Hill
Co-Founder, Tradingsim.com
