Understanding your options for crypto investing

Investing in cryptocurrencies can be both exciting and daunting, especially with so many options available. Whether you’re a seasoned trader or a curious newcomer to the world of digital currencies, it’s important to understand the different ways you can invest.

From directly owning cryptocurrencies like Bitcoin and Ethereum, to exploring futures contracts and exchange-traded funds (ETFs), each method offers unique benefits and challenges. This guide will walk you through the various options, helping you make informed decisions based on your investment goals and risk tolerance.

How it works: Direct ownership involves buying and holding actual cryptocurrencies. Once acquired through an exchange, your crypto tokens are stored in your digital wallet, which can be either software-based (like an app on your phone) or a physical hardware wallet (often resembling a USB drive). As the holder of the “private keys” – a string of data that acts as a password – to this wallet, you have exclusive access to your crypto, allowing you to move and manage it without relying on third-party custodians.

Pros:

• You maintain full control and autonomy over your crypto assets.
• You can access financial services built exclusively on blockchain technology, such as decentralized finance (DeFi) platforms.

Cons:

• You need to manage your keys securely to avoid theft or loss.
• Selling or transferring coins, as well as transaction fees, may have tax implications.

How they work: Crypto futures allow you to speculate on what the price of a cryptocurrency will be in the future without directly owning it. These contracts may settle in cash or involve delivery of the actual crypto asset. Additionally, you can borrow funds to invest in crypto future contracts, which allows you to control a larger position with only a small portion of the contract’s value, though this approach has additional risks.

Pros:

• You can potentially make money even if crypto prices fall.
• Contacts are traded on regulated exchanges, adding a layer of security.

Cons:

• Futures can be complicated and risky if you’re not familiar with how they work.
• You might need to actively manage your investments to help minimize risks.
• Limited trading hours

How they work: Spot crypto ETPs are products that own actual cryptocurrencies. When you buy shares in these products, you get exposure to the price movements of the cryptocurrencies they hold. This is a way to invest in crypto without having to buy and store the coins yourself.

Pros:

• ETFs offer an accessible, secure and regulated¹ way to gain exposure to cryptocurrency without the technical complexities of direct ownership.
• They are easy to buy and sell through regular brokerage accounts.
• Possible diversification of custodians through multiple ETPs

Cons:

• Custody risk: You rely on the product to keep the cryptocurrency secure.
• Investors may incur fees and can typically trade only during stock market hours.

How they work: These ETFs invest in futures contracts instead of holding the actual cryptocurrencies. They trade like regular ETFs, offering a familiar investment vehicle, but their performance can differ from the actual price of the cryptocurrencies due to the complex nature of futures and the dynamic markets in which they trade.

Pros:

• Like other ETFs, futures-based ones avoid the need to store crypto directly.
• They are transparent, accessible and traded on regulated exchanges.

Cons:

• ETF performance may deviate from the underlying crypto assets.
• Fund value can be dragged down over time by operational fees and market conditions.

How they work: Investing in companies involved in the cryptocurrency industry offers indirect exposure to crypto without having to directly buy or manage it yourself. This approach allows investors to benefit from the potential growth and innovation within the crypto and blockchain ecosystem by owning shares in businesses such as:

• Cryptocurrency exchanges, where investors can trade cryptocurrencies for other digital assets or traditional money. 

• Custody and security providers, which securely store and manage digital assets for clients.

• Crypto miners, which use specialized hardware to validate transactions and add new blocks to the blockchain, earning crypto as a reward.

• Corporate treasury investors—companies that hold cryptocurrencies as part of their financial reserves.

• Blockchain infrastructure and enterprise solutions, providing the tech and services needed for businesses to create and manage blockchain apps.

• DeFi platforms, which provide financial services on blockchain technology without traditional intermediaries.

Pros:

• You can potentially benefit from the potential growth of the crypto industry.
• You avoid the complexities and risks of directly handling digital currencies.

Cons:

• Your investment depends on the success of the company, not just the crypto market.
• Company performance can be affected by factors unrelated to cryptocurrencies.

Choosing how to invest in cryptocurrencies depends on your personal preferences and risk tolerance. Direct ownership gives you full control but requires careful management, while ETFs, ETPs, and stocks offer more familiar alternatives.

As the crypto market continues to change, staying informed and flexible is key to making smart investment decisions.

Article Footnotes

¹ A crypto ETF (exchange-traded fund) is a type of exchange -traded product (ETP) that is registered under the Investment Company Act of 1940 (“40 Act”) and regulated as an investment company. In the crypto context, ETPs are typically structured as trusts holding spot crypto assets or derivatives, and are registered under the Securities Act of 1933 and the Securities Exchange Act of 1934, but not under the 40 Act. Perhaps most importantly for traders, ETFs benefit from the 40 Act’s investor protections, including custody rules and valuation standards.

CRC# 5159508  12/2025