Key Takeaways
- • Investopedia outlines six routes into crypto exposure: buying coins directly through an exchange, investing in crypto-linked companies, crypto-focused funds, a crypto Roth IRA, or mining and validating.
- • The article stresses that crypto prices are far more volatile than stocks and that regulatory changes could affect holdings, with the worst case being that cryptocurrency becomes illegal.
- • Investors are urged to size crypto positions at amounts they can afford to lose, and to weigh transaction fees, which vary widely across currencies.
- • The article notes the SEC approved the first Bitcoin spot ETFs in 2024, and that over 17,000 digital coins exist, making research essential before buying any one.
Summary
Investopedia's beginner guide, written by Allie Grace Garnett and reviewed by Cierra Murry and fact-checked by Vikki Velasquez, sets out the main ways to gain cryptocurrency exposure and the risks that accompany them. Direct purchases are described as the most common approach, ranging from established assets such as Bitcoin and Ethereum to newly released, little-known coins.
Indirect routes include equities of companies with a crypto focus, such as crypto miners, mining hardware makers, and digital asset treasury companies. The article cites Strategy (formerly MicroStrategy, MSTR), which holds large crypto balances on its balance sheet, and notes less direct exposure through Robinhood Markets (HOOD) and PayPal Holdings (PYPL), which support crypto activity. Crypto-focused funds include index funds, futures funds and investment trusts. The article notes that in 2024 the Securities and Exchange Commission approved the first Bitcoin spot ETFs, which hold Bitcoin and track its spot price. Some funds hold coins directly while others invest in companies or derivatives such as futures.
The guide also describes a crypto Roth IRA, which offers tax advantages and can use a provider to secure holdings, and mining or validating, which earns crypto rewards. A six-step process for buying through an exchange is outlined: select a reputable exchange, register and verify identity, fund the account in fiat currency, choose assets, place the order, and store holdings in a digital wallet.
The article's risk section is the central message. Cryptocurrency prices, even for the largest coins, are described as far more volatile than stocks, and regulatory developments may affect prices. Investors are advised to research individual coins, watch transaction fees, understand tax consequences, and periodically rebalance their portfolios. The article concludes that crypto offers significant upside potential alongside high risk, with no guarantee of profit.
Indirect routes include equities of companies with a crypto focus, such as crypto miners, mining hardware makers, and digital asset treasury companies. The article cites Strategy (formerly MicroStrategy, MSTR), which holds large crypto balances on its balance sheet, and notes less direct exposure through Robinhood Markets (HOOD) and PayPal Holdings (PYPL), which support crypto activity. Crypto-focused funds include index funds, futures funds and investment trusts. The article notes that in 2024 the Securities and Exchange Commission approved the first Bitcoin spot ETFs, which hold Bitcoin and track its spot price. Some funds hold coins directly while others invest in companies or derivatives such as futures.
The guide also describes a crypto Roth IRA, which offers tax advantages and can use a provider to secure holdings, and mining or validating, which earns crypto rewards. A six-step process for buying through an exchange is outlined: select a reputable exchange, register and verify identity, fund the account in fiat currency, choose assets, place the order, and store holdings in a digital wallet.
The article's risk section is the central message. Cryptocurrency prices, even for the largest coins, are described as far more volatile than stocks, and regulatory developments may affect prices. Investors are advised to research individual coins, watch transaction fees, understand tax consequences, and periodically rebalance their portfolios. The article concludes that crypto offers significant upside potential alongside high risk, with no guarantee of profit.
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