Cryptocurrency is one of the most exciting investments right now. Something that didn’t exist a generation ago now has over 1500 different iterations, and it’s funneling gains into the pockets of savvy investors of all skill and income levels. But crypto investing can be intimidating.
A lot of investors don’t even know where to get started. Once you get past this hurdle and dive in, however, the ride is unparalleled. The obvious choice is to get on an exchange and start buying crypto, but this certainly is not the only option. And it’s definitely not the best option for many people.
Thinking about investing in crypto but not sure exactly how you want to get involved? Then, check out these ideas. This guide looks at alternative ways to invest in virtual currencies.
1. Crypto Exchange Traded Funds
There are over 1500 types of cryptocurrency. Some like Bitcoin make a lot of headlines, and others you’ve probably never heard of. Researching all of the options can be time-consuming and futile. An exchange-traded fund (EFT) lets you invest in multiple cryptocurrencies at the same time.
Instead of handpicking individual virtual currencies, you only need to research a few funds. Then, you choose the one you like the best, put in your money, and enjoy the benefits of diversification.
2. Blockchain ETFs
Blockchain ETFs are a great option for investors who are leery about investing directly in crypto but are excited about its potential. These ETFs also have a mixture of investments. So, again, you don’t have the burden or the risk of hand-picking investments.
However, instead of focusing on cryptocurrencies, they are full of blockchain investments. The blockchain is the technology that makes crypto possible. These investments include companies that use or develop this technology.
3. Solo 401k’s
Solo 401k’s are retirement accounts available to anyone who is self-employed. Regardless of the type of business you have — you could be a fancy lawyer, an Uber driver, both, or anything in between. As long as you’re self-employed and only employ other people part-time, you can open a solo 401k and fund it with cryptocurrencies.
The main advantage is the tax deduction and the high contribution limits. As of 2022, you can invest up to $61,000 in a solo 401k, and those are all pre-tax dollars. Note that your self-employment income also affects your contribution limits.
The gains in these accounts are also tax-free. You only pay tax when you take the money out during retirement, and if you need it before then, there are ways to borrow from these funds.
4. Independent Retirement Accounts
You can also use an IRA to invest in cryptocurrency. If you currently have an IRA, contact your plan administrator and see if they’re willing to invest in crypto. Unfortunately, many IRA advisors prefer to stay in the arena of stocks, bonds, and CDs. They’re not willing to foray into the world of alternative investments.
In that case, you can also open a self-directed IRA. Then, you can fund it from scratch or roll your existing IRA into that account. Because it’s self-directed, you can fill it with as many cryptocurrencies or crypto ETFs as you like.
You can contribute up to $6000 pre-tax into your IRA. This is only about a tenth of what you can contribute pre-tax to a solo 401k, but many people choose the IRA over the 401k simply because they’re more familiar with that option.
5. Investments in Companies That Deal With Crypto
If you don’t want to directly invest in cryptocurrency, you may want to consider investing in companies that have investments in or relationships with crypto. This includes companies that mine crypto, develop blockchain technology, or have a lot of crypto investments.
With this option, you are investing in a real company. You can track its business practices and read its financial statements every year. That is more comfortable for many new crypto investors.
Crypto, in contrast, is not backed by assets or business practices. Its gains and losses are solely subject to the demand of investors. That’s why it’s so volatile. Investors who aren’t ready for the volatility may prefer to take this tangential approach to crypto investing.
6. Crypto ATMs
Not ready to open an investment account? Just looking for an easy way to invest in crypto? Then, you may want to look for a crypto ATM. These ATMs work just like a regular ATM, but instead of drawing cash out of your bank, you buy cryptocurrency.
Many of the machines that count your coins now also sell cryptocurrency. If you’re ready to cash out your coin jar, this can be an easy way to start investing. And it’s basically risk-free because you weren’t using those coins anyway.
The upside is convenience. You just find an ATM, make your purchase, and watch your investment grow (or lose money). The downside is that most of these machines only sell Bitcoin so if you’re interested in other types of cryptos, this might not be the best path for you.
7. Peer-to-peer sites
Peer-to-peer sites are similar to crypto exchanges in that they allow you to buy and sell crypto. But they have a slightly more casual and less intimidating feel. They can be an easy way to get started. Then, if you want to do more aggressive trades, you can switch to the exchanges.
Cryptocurrency is an exciting investment, and because it’s so new, no one can really predict what’s going to happen. Whether you want to directly buy a certain type of virtual currency or get involved on a tangential basis, there are all kinds of ways to get started with crypto. You may even want to try a few of these options at the same time to see what works best for your situation.