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How to Invest in Crypto Without Buying Crypto

You don’t have to buy crypto directly to get exposure to the crypto trend. Instead, explore investing in enabling technologies like blockchain — as well as in the companies poised to benefit from the growth in digital assets.

October 1, 2024 6 min read

With roughly 580 million crypto users worldwide,¹ there’s plenty of excitement surrounding the growth potential of the crypto market. And, there's increasing evidence of the market's maturation as more institutions recognize the long-term growth potential of the asset class.

In fact, 94% of institutions believe in the long-term value of crypto, along with blockchain technology and digital assets, and 55% of institutions expect to increase their allocations to digital assets in the next two to three years.²

But owning crypto directly — a relatively new and rapidly evolving asset class — isn’t for everyone. If you don’t want to learn how to self-custody your crypto assets safely in a crypto wallet, you can still trade crypto on an exchange — but that means another password to remember and more work for you. Crypto also can be much more volatile than stocks.³

The good news for investors interested in crypto but hesitant to take on buying it directly, is that crypto is just one component of the burgeoning digital asset ecosystem. Investors can still gain exposure to the crypto industry’s potential growth by choosing instead to invest in the technologies and companies poised to lead, enable, or benefit from the adoption of digital assets. How? With indirect crypto investing.

What Is Indirect Crypto Investing?

Indirect crypto investing involves investing in assets and companies that are thematically related to crypto or investing in crypto through more traditional investment vehicles like mutual funds and ETFs.

Investing in crypto ETFs or the infrastructure that enables crypto, blockchain, and digital assets gets you exposure to the crypto universe without the custodial hurdles or all of the potential risks of directly owning crypto.

Quick Quiz

Which cryptocurrency was created first?

Ethereum

Bitcoin

Right! The first cryptocurrency, bitcoin, was created in 2009, laying the foundation for the crypto industry.

Not quite. Bitcoin was created in 2009, while Ethereum came later in 2015.

How to Indirectly Invest in Crypto

Investing in the digital asset ecosystem — AI, blockchain, and other companies in the value chain — enables you to potentially capture the growth in crypto and other tokenized assets like non-fungible tokens as their adoption accelerates.

Consider the ways to indirectly invest in crypto.

1. Bitcoin Mining Stocks

Bitcoin mining stocks represent publicly traded companies that operate equipment dedicated to validating transactions on the Bitcoin network and competing to earn rewards in the form of newly issued bitcoin. Over the long term, these companies could benefit from potential increases in crypto prices.

2. Blockchain Technology Stocks

Blockchain technology enables the creation and trading of tokenized assets and is the foundation of cryptocurrency trading. Blockchain technology stocks could be any company developing blockchain technology, involved in crypto mining or staking, or providing services to companies that are using blockchain.

Blockchain technology has vast applications across various industries, and growth in those uses cases is likely to increase the adoption of digital assets. And, likewise, the increased adoption of crypto may spur further growth of blockchain companies.

3. Infrastructure and Crypto-related Businesses

A picks-and-shovels investing approach considers investments in companies in sectors and industries that build the infrastructure and provide services that support the larger digital assets ecosystem, including:

Financial Services and Fintech. The use of blockchain technology and crypto could rapidly evolve the world of finance as payments move to cryptocurrencies and banks look to expand crypto-related services.
Payment Processors. Further adoption of crypto payments could benefit payment processors as they integrate crypto into their platforms.
Crypto Exchanges. As crypto gains wider adoption, crypto exchanges could see further growth through higher trading volume.
Semiconductors and Hardware. Verification of blockchain transactions through crypto mining requires lots of computer power, processing units, and data center support. Companies that build hardware like graphics processing units to run applications that support cryptocurrency and blockchain use cases could continue to see growth.
Cybersecurity. As enterprise applications for crypto and blockchain grow, cybersecurity companies that develop solutions to protect against hacking, fraud, and data loss could be both at the forefront of crypto’s growth and poised to benefit from it.
Software Development. As cryptocurrency and blockchain are more widely adopted across industries, software to run specific applications may be needed.

4. Crypto-related ETFs

You can gain exposure to crypto and related technologies through the ETF wrapper in your regular brokerage.

Crypto industry ETFs. These are baskets of securities related to digital assets that trade throughout the day on an exchange just like a single stock. In addition to value chain exposures, these funds may also invest in cryptocurrency itself, may contain stocks that operate in the crypto industry, or stocks of companies that work in tangential industries.
Spot crypto ETPs. The US Securities and Exchange Commission approved spot bitcoin ETPs in January 2024, after several failed bids.⁴ Spot crypto ETPs seek to track the price of one specific crypto asset.
Crypto futures ETFs. Holding futures contracts enables investors to gain indirect exposure to movements of a specific crypto, without owning them.

What to Consider When Investing in Crypto-related Assets

Investors who take a long-term view could benefit from the growing adoption and use cases of crypto, blockchain, and digital assets. Cryptocurrencies are just one component of the digital assets ecosystem. Investing in the growing digital assets industry through indirect crypto investing offers investors the potential to capture long-term returns as the industry matures, without the risks or hassle of managing a crypto wallet or owning through a crypto exchange.

Get Started With SPDR® Galaxy ETFs

The astounding pace of innovation in the digital assets space supports taking an active approach to this burgeoning industry. SPDR Galaxy Digital Asset ETFs offer exposure to the return potential of crypto, blockchain technology, and companies poised to lead or benefit from revolution in digital assets — and they are actively managed to keep pace with the industry’s evolution and effectively manage risks.

Frequently Asked Questions

What are crypto-related stocks?

What are the benefits of investing in crypto ETFs instead of directly in coins?

How does exposure to blockchain companies offer indirect crypto investment?

What are crypto-mining stocks and how do they work?

Can you invest in digital asset funds without buying crypto directly?

Glossary

Blockchain
A blockchain is a distributed ledger with growing lists of records (blocks) that are securely linked together via an algorithm. This public ledger records all transactions that have ever been executed on that blockchain. Blockchains are constantly growing, as completed ‘blocks,’ or transactions, are added in a linear, chronological order. Every computer connected to the Bitcoin network gets a copy of the blockchain which, in theory, makes the whole system more secure as more computers, or “nodes”, become part of the blockchain.

Cryptocurrency
Cryptocurrency, or crypto, is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it.

Exchange
The marketplace where securities, commodities, derivatives and other financial tools such as ETFs are traded. Exchanges, such as stock exchanges, allow for fair and orderly trading and efficient circulation of securities prices. Exchanges give firms looking to market publicly listed securities the platform to do this.

Exchange Traded Fund (ETF)
An ETF is an open-ended fund that provides exposure to underlying investment, usually an index. Like an individual stock, an ETF trades on an exchange throughout the day. Unlike mutual funds, ETFs can be sold short, purchased on margin and often have options chains attached to them.

Fintech
Shorthand for “financial technology” — a term used to describe technological innovation in the financial world, including the peer -to-peer digital currency Bitcoin or even the exchange-trade fund.

Futures
Financial contracts that obligate buyers and sellers to buy or sell an asset — often physical commodities or financial instruments — at a predetermined future date and price. Futures contracts also stipulate the quality and quantity of the underlying asset and are standardized to facilitate trading on a futures exchange. Some futures call for physical delivery; others are settled in cash.

Futures Exchange
A central marketplace where futures contracts, options or other derivatives are traded.

Non-fungible Token (NTF)
A unique digital identifier that is recorded on a blockchain and used to certify ownership and authenticity. It cannot be copied, substituted, or subdivided. NFT ownership is recorded in the blockchain and can be transferred by the owner, allowing NFTs to be sold and traded.

Options
Financial derivative contracts sold by one party, called the option writer, to another, referred to as the option holder. Options contracts offer the buyer the right, but not the obligation, to buy (a call) or sell (a put) a security at an agreed -upon price, which is called the strike price.

Footnotes

Disclosure

Important Risk Disclosure

Investing involves risk including the risk of loss of principal.

Diversification does not ensure a profit or guarantee against loss.

The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.

All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.

ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs’ net asset value. Brokerage commissions and ETF expenses will reduce returns.

Frequent trading of ETFs could significantly increase commissions and other costs such that they may offset any savings from low fees or costs.

Equity securities may fluctuate in value and can decline significantly in response to the activities of individual companies and general market and economic conditions.

Derivative investments may involve risks such as potential illiquidity of the markets and additional risk of loss of principal.

Financial Services Sector concentration are subject to government regulation, deterioration of credit markets, losses resulting from financial difficulties of borrowers and losses resulting from investment activities.

Options investing entail a high degree of risk and may not be appropriate for all investors.

Investing in futures is highly risky. Futures positions are considered highly leveraged because the initial margins are significantly smaller than the cash value of the contracts. The smaller the value of the margin in comparison to the cash values of the futures contract, the higher the leverage. There are a number of risks associated with futures investing including but not limited to counterparty credit risk, basis risk, currency risk, derivatives risk, foreign issuer exposure risk, sector concentration risk, leveraging and liquidity risks.

Non-diversified funds that focus on a relatively small number of securities tend to be more volatile than diversified funds and the market as a whole.

Narrowly focused investments and investments in technology stocks may involve greater risk of capital loss and higher price volatility.

Because of their narrow focus, sector investing tends to be more volatile than investments that diversify across many sectors and companies.

TEKX, HECO, and DECO may emphasize a "growth" style of investing. The market values of growth stocks may be more volatile than other types of investments. The prices of growth stocks tend to reflect future expectations, and when those expectations change or are not met, share prices generally fall. The returns on "growth" securities may or may not move in tandem with the returns on other styles of investing or the overall stock market.

TEKX, HECO, and DECO may invest in companies within the cryptocurrency, digital asset and blockchain industries that use digital asset technologies or provide products or services involved in the operation of the technology. The technology relating to digital assets, including blockchains and cryptocurrency, is new and developing and the risks associated with digital assets may not fully emerge until the technology is widely used. The effectiveness of the Fund’s strategy may be limited given that the operations of companies in the cryptocurrency, digital asset and blockchain industries are expected to be significantly affected by the overall sentiment related to the technology and digital assets, and that the companies’ stock prices and the prices of digital assets could be highly correlated. Certain features of digital asset technologies, such as decentralization, open source protocol, and reliance on peer-to-peer connectivity, may increase the risk of fraud or cyber-attack. Restrictions imposed by governments on digital asset related activities may adversely impact blockchain companies and, in turn, the Fund. Companies within the cryptocurrency, digital asset and blockchain industries may also be impacted by the risks associated with digital asset markets generally.

TEKX, HECO, and DECO may invest in companies that rely on technologies such as the Internet and depend on computer systems to perform business and operational functions, and therefore may be prone to operational and information security risks resulting from cyber-attacks and/or technological malfunctions. Successful cyber-attacks against, or security breakdowns of, a company included in the Fund’s portfolio may result in material adverse consequences for such company, as well as other companies included in the portfolio, and may cause the Fund’s investments to lose value.

Concentrated investments in a particular industry tend to be more volatile than the overall market and increases risk that events negatively affecting such industries could reduce returns, potentially causing the value of the TEKX, HECO and DECO shares to decrease.

TEKX, HECO, and DECO are actively managed. The sub-adviser’s judgments about the attractiveness, relative value, or potential appreciation of a particular sector, security, commodity or investment strategy may prove to be incorrect, and may cause the fund to incur losses. There can be no assurance that the sub-adviser’s investment techniques and decisions will produce the desired results.

The value of certain of DECO’s and HECO’s investments in cryptocurrency ETFs and ETPs that invest in crypto assets and in publicly traded securities of companies engaged in digital asset-related businesses and activities are subject to fluctuations in the value of the crypto asset, which may be highly volatile. The market for crypto asset futures contracts may be less developed, and potentially less liquid and more volatile, than more established futures markets.

HECO’s use of options involves speculation and can lead to losses because of adverse movements in the price or value of the underlying stock, index, ETF, ETP or other asset, which may be magnified by certain features of the options. The Fund’s successful use of options depends on the ability of the Adviser to forecast market movements correctly.

Companies that provide products or services that are supporting or accelerating the disruptive potential of novel technologies (“Transformative Tech Accelerators”) are engaged in emerging industries and/or new technologies that may be unproven. Transformative Tech Accelerators are vulnerable to rapid changes in product cycles, and may have limited product lines, markets, financial resources or personnel. Companies that rely heavily on technology tend to be more volatile than the overall market and are subject to additional risks specific to their industries.

SSGA Funds Management, Inc. has retained Galaxy Digital Capital Management LP (“Galaxy Digital”) as the sub-adviser. State Street Global Advisors Funds Distributors, LLC is not affiliated with Galaxy Digital.

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