Exploring Cryptocurrency Investment: Options, Risks, and Popular ETFs

As interest in cryptocurrency continues to rise, investors are exploring various methods to incorporate digital assets into their portfolios. Each option presents unique benefits and drawbacks, necessitating careful consideration before making investment decisions.

Direct Investment Through Cryptocurrency Exchanges

The most straightforward approach to gain cryptocurrency exposure is through a cryptocurrency exchange. Platforms like Coinbase Global Inc. (ticker: COIN), Kraken, and Binance have made it easy for investors to directly access hundreds of digital tokens. These exchanges offer several advantages, such as high liquidity, advanced trading tools, and opportunities for staking coins to earn yield. Additionally, exchanges may provide access to decentralized finance (DeFi) products that allow for further engagement in the crypto economy.

However, investing through exchanges does come with significant risks. Security is a primary concern, as most exchange-based wallets, known as hot wallets, are constantly connected to the internet and thus vulnerable to hacking. High-profile cases of exchange collapses, such as FTX, Celsius, and Voyager, have left many users unable to access their funds, underscoring the importance of considering security risks when choosing to invest in cryptocurrency through exchanges.

Holding Cryptocurrency in Cold Wallets

An alternative to exchange trading is to withdraw crypto from an exchange and store it in a cold wallet. Cold wallets can be either hardware devices, like Ledger, or even paper wallets, which store crypto offline, ensuring that the assets are fully controlled by the owner. This method eliminates counter-party risks associated with exchanges, offering peace of mind regarding the safety of the investment.

However, managing a cold wallet requires individuals to assume greater responsibility for their assets. The risks involve the potential loss of private keys or loss of access due to forgotten seed phrases, which can lead to permanent loss of access to the cryptocurrency. Additionally, there have been concerning reports of crypto investors facing real-life kidnapping threats due to their wealth in digital assets, highlighting the dangers that can come with self-custody.

Gaining Exposure via Cryptocurrency ETFs

For those who prefer a more traditional route, cryptocurrency exchange-traded funds (ETFs) present an appealing alternative. These funds are managed by institutional asset managers who acquire bitcoin or other digital assets and place them inside an ETF wrapper, making them available for trading on major stock exchanges.

The primary advantages of crypto ETFs include enhanced liquidity and ease of access; if an investor is familiar with trading stocks, they will find navigating a crypto ETF to be a similar experience. There is no need to worry about wallet security, private keys, or the potential insolvency of exchanges. However, investors should note that crypto ETFs do not provide the option to exchange holdings for digital assets, meaning they cannot transfer these assets to private wallets. Additionally, trading for these funds is limited to regular or extended market hours, while the cryptocurrency market operates 24/7.

Chris Kline, chief operating officer and co-founder of Bitcoin IRA, remarked on the progression of options available for investors, noting, “Looking back at 2016, there was only one option to directly hold Bitcoin within your retirement account. Now, there are routes to hold crypto assets in nearly every type of financial account, and the market is better for it.”

Seven Noteworthy Cryptocurrency ETFs

Here are seven noteworthy cryptocurrency ETFs that investors can consider:

iShares Blockchain and Tech ETF (IBLC) – 0.47% expense ratio

Offers broad exposure to blockchain technologies, with top holdings including Coinbase and Riot Platforms.

Global X Blockchain ETF (BKCH) – 0.50% expense ratio

Tracks the Solactive Blockchain Index and includes a mix of financial and technology-related companies.

iShares Bitcoin Trust ETF (IBIT) – 0.25% expense ratio

This spot Bitcoin ETF, structured as a grantor trust, currently boasts over $56 billion in assets under management.

iShares Ethereum Trust ETF (ETHA) – 0.12% (initially up to 0.25% after July 2025)

Tracks the CME CF Ether-Dollar Reference Rate and has attracted significant investment.

ProShares Bitcoin ETF (BITO) – 0.95% expense ratio

This older ETF does not hold spot Bitcoin, using futures contracts instead and providing a trailer yield based on those contracts.

Roundhill Bitcoin Covered Call Strategy ETF (YBTC) – 0.95% expense ratio

Utilizes a covered call strategy on Bitcoin. It offers potential high income but comes with capped upside exposure.

Roundhill Ether Covered Call Strategy ETF (YETH) – 0.95% expense ratio

Similar to YBTC, this fund employs a covered call strategy using Ethereum as its underlying asset, also providing monthly income distributions.

Market Trends and Future Insights

According to industry experts, there have been notable shifts in the regulatory landscape regarding cryptocurrency, particularly under changing governmental administrations. Kline noted, “The Trump administration’s continued warming towards crypto has created a seismic shift forward for the industry,” suggesting a regulatory embrace that may benefit crypto investors.

As the cryptocurrency market evolves, the variety of available investment options allows investors to tailor their exposure based on their risk tolerance, investment goals, and desired level of engagement with digital assets. As always, individuals should conduct thorough research and consider their financial situation prior to investing in cryptocurrency or related financial products.