6 Different Approaches to Investing in Cryptocurrencies

Public interest in cryptocurrency has surged over the past few years, but many newcomers to crypto still have very abstract notions about how to invest in it. In truth, there’s more than one way to invest in this interesting and relatively novel form of asset. An investor can choose to pursue purely crypto-related investments, or they can look into arrangements where crypto is bundled with investments from other classes. Either way, if one is not discouraged by the learning curve or the risks associated with cryptocurrency investment, dipping one’s toes in it may be a rewarding and innovative means to diversify one’s investment portfolio.  

What are the different approaches that you can take if you want to invest in cryptocurrency? To answer that question, here’s a briefer on the six most popular approaches for investing in crypto. 

Direct Cryptocurrency Investments

The most well-known option for investing in crypto is the one that involves directly trading in one particular currency. The market for crypto coins is now more diverse and exciting than it’s ever been. You can choose to start investing in popular crypto coins like Bitcoin (BTC), Ethereum (ETH), and Binance (BNB). But you can also pursue up-and-coming privacy coins like Monero (XMR) and keep your XMR investments safe in a dedicated Monero wallet.

Cryptocurrency Basket Investments 

Another option that involves pure crypto-related investments is a cryptocurrency basket. The basket acts like a digital cornucopia of currencies and allows the investor to experience trading with different crypto coins all at once. In this respect, it’s no different from a sampler basket that curates goods like wine, foreign foods, or digital subscriptions. This investment option is good for crypto traders who haven’t developed their preferences yet and want a beginner’s introduction to the different crypto coins. 

Cryptocurrency Staking Rewards

More advanced crypto traders can stake their assets on the crypto’s network and invest in the future development of the crypto’s blockchain. In exchange, an investor will be able to receive special staking rewards—which is not unlike receiving a yield from a bank’s high yield savings account. If you find yourself becoming passionate about a certain cryptocurrency and want to advocate for its success in the future, take note of this particular investment option. 

Index Funds with Cryptocurrency Included

There’s also the possibility of a passively managed index fund with cryptocurrency as part of the package. This may appeal to an investor who wants a more hands-off approach to investing in crypto and other assets. If you want a diversified, relaxed, and fairly affordable means of investing in crypto, then an index fund that includes cryptocurrency may be right up your alley. 

Mutual Funds with Cryptocurrency Included

Another attractive multi-asset investment that can help you discover cryptocurrency is a mutual fund with crypto included. Nowadays, it won’t be too hard to find a mutual fund that bundles crypto with other assets like stocks and bonds. The most appealing characteristic of a mutual fund with crypto is that it will be overseen by a fund manager. You can rely on their expertise and get some extra advice on a good all-around investment strategy.

Cryptocurrency Exchange Traded Funds

Lastly, it’s also an option to pursue a cryptocurrency exchange traded fund, or ETF. ETFs are baskets of securities that are traded on an exchange, and unlike mutual funds, they can be bought or sold anytime. You can start buying shares of crypto ETFs through a brokerage service, which will enhance the overall security of your investment. However, you must remember that that doesn’t fully shield you from the volatility that comes with any crypto investment.    

Final Words: On Choosing a Way to Invest in Cryptocurrency

There’s honestly no right or wrong way to invest in cryptocurrency. And like your investments in other asset classes, the success of your investment in crypto depends on the following factors:

  • How involved you want to be in cryptocurrency trading. Some investors may want to put a lot of focus on their crypto assets, while others may want to see it as just one among many other diversified assets in their portfolio. How much of the limelight are you willing to give your crypto coins?

  • What role crypto will play in your investment journey. There are some investors who will want to use their crypto coins as mere hedges for other assets. Other crypto investors may evolve into passionate advocates for loftier ideals, like decentralized finance. In the future, which kind of investor will you be, and what role will crypto play in your financial goals?

  • How much crypto-related risk you want to take on. Different investors have different risk appetites. More importantly, some investors may be better equipped for higher-risk crypto investment options than others. What’s your current risk threshold, and how will crypto affect that? 

If you want to make good on your crypto investment, choose your investment approach wisely and make sure it’s aligned with your long-term financial interests. That is the best mindset to have when awaiting your crypto investment returns. 

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