Indirectly Investing in Crypto: How to Do It Right
Cryptocurrencies have attracted much interest, and people have made eye-watering profits by getting in at the right time. However, as we’ve seen with the likes of Luna, many others have lost out. So, is there a way to start indirectly investing in crypto so that you can mitigate some of the risks?
The State of Crypto
It’s no secret that we’re in the midst of what some might call a “Crypto Winter.” The May ’22 crash has burned many investors and hodlers. Additionally, it significantly impacted the newer investors who entered the crypto market during the surge at the height of Covid-19.
At this time of writing, in mid-2022, the outlook remains uncertain. However, there are exciting events happening, with new projects advancing the Web3 era. The Ethereum Merge is also keeping crypto followers excited, with reports of rapid and more environmentally friendly transactions.
Among the crypto followers, the sentiment is still optimistic over the long-term, with the next Bitcoin halving around the end of 2023/early 2024 expected to trigger the market to new highs.
As the market remains turbulent, you might not quite feel ready to buy cryptocurrencies despite the promising long-term future.
Indirectly Investing in Crypto
Fortunately, you don’t need to buy cryptocurrencies to invest in crypto. There are a number of ways you can indirectly invest in crypto.
One of the easiest ways to indirectly invest in crypto is peer-to-peer (P2P) lending. You can lend fiat currency like USD to support loans that use crypto as collateral. At MyConstant, you can earn up to 8% APR by lending your USD to borrowers (who use crypto as collateral).
The loans are repaid with interest each month, and your investment capital is returned to you at the end of the term.
For example, if you invest $10,000 in loans via MyConstant, you could earn $800 back in one year and over $1,600 back in two years. And there’s no management fees, no minimum investment amount, and flexible terms.
It’s a great way to learn about crypto without directly exposing your funds to the volatile market.
Exchange-Traded Funds (ETFs)
The second way to indirectly invest in crypto is Exchange-Traded Funds (ETFs). ETFs are essentially ticker symbols that represent crypto assets.
For example, BlockFi offers a crypto ETF that tracks the price of bitcoin. Similarly, Coinbase offers multiple ETFs that track the prices of different cryptocurrencies, such as XRP and Stellar Lumens.
This allows you to invest in the crypto market without owning cryptocurrency. While it might seem more convenient, buying a crypto ETF or similar products like a crypto index fund tends to be more expensive than purchasing crypto itself. Firms like Grayscale charge you a 2% fee for simply holding bitcoin on your behalf.
Therefore, it might not be the best option if you can buy and sell crypto directly by using a platform like MyConstant or Binance.
For more details, check out a blog we recently published on bitcoin ETFs.
Stocks and Shares
Alternatively, you can invest in shares and stocks of companies that use blockchain or have crypto investments.
The blockchain industry is currently valued at over $7bn and growing fast. Companies like Facebook and Amazon are investing in blockchain technology and have set up blockchain research labs to explore its applications in the retail and online sectors. By 2029, the market is set to reach over $160bn, according to Fortune Business Insights – a mind-boggling CAGR of 56% a year.
While the fortunes of crypto and blockchain are currently correlated, there’s a good chance that blockchain will mature as mainstream technology over the next few years – making it a growth driver for the broader tech sector. This gives you the option to build a diversified investment portfolio beyond cryptocurrencies.
Investing in Crypto
You could follow these investment strategies to minimize your exposure to cryptocurrencies, but that would mean you’d lose out on the full benefits. If your goal is to achieve the best returns possible with minimal risk, it’s important to find a balance between the two.
For example, you could have some crypto in your investment portfolio to reap the benefits of the underlying technology while diversifying into other asset classes to limit your exposure and avoid capital losses if the market crashes.
A good example of a diversified investment portfolio could look like this:
- 40% in real estate
- 30% in stocks and shares
- 20% in bitcoin or other cryptocurrencies
- 10% in other investments
This is by no means definitive, and you should do your own research (DYOR) to find the right mix for you. Get a good understanding of your risk tolerance and investment goals, which will be the basis of your strategy.
Build Your Portfolio with MCT
If you’re weighing up different investing options, why not take a look at our new native MCT token?
It allows you to take advantage of various blockchain-related investments at once. With a single coin, you can stake your cryptocurrencies, try P2P investing, and more. This way, you can experiment with different projects and ways to earn.
- Up to 18% APR from staking
- 20% more interest from MyConstant investing products
- 20% reduction in borrowing fees on MyConstant
- 50% discount on NFT fees through MyConstant
- 50% discount on crypto swap fees on MyConstant
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