- Bitcoin hit $100,000 this week. Some forecasters expect it to double next year.
- Investors can gain exposure by holding bitcoin itself, or by buying ETFs and crypto-linked stocks.
- For a fee, ETF investors can avoid some of the complexities of holding the token.
Bitcoin finally claimed the $100,000 milestone, cementing confidence in further gains to come.
The watershed moment has emboldened Wall Street forecasters, some of whom have raised expectations for bitcoin's price to double by the end of 2025.
President-elect Donald Trump's incoming administration has bolstered optimism with promises to revamp crypto regulation and help institutionalize the apex token.
Still, studies show that the vast majority of US adults don't hold bitcoin. For non-crypto investors whose curiosity has been piqued by the popular token, here's a primer on some of the ways to invest.
Hold bitcoin or buy an ETF?
Traditionally, the main way for US investors to join the bitcoin frenzy was, well, to buy bitcoin.
Bitcoin can be purchased on many popular brokerage platforms, including Robinhood and Fidelity, and through crypto exchanges like Coinbase.
However, January's regulatory approval of spot bitcoin ETFs vastly expanded the options for investors, providing a new avenue for crypto exposure. ETF shares are backed by actual bitcoin purchased by the fund, similar to physical gold ETFs that hold the precious metal.
According to Bruno Caratori, the cofounder of Hashdex, which is one of the 11 approved ETF providers, these investment vehicles best serve to mitigate behavioral risk associated with buying actual bitcoin, and might be a more welcoming approach to those who don't invest professionally.
"It's all too easy for people to buy bitcoin when it's too high, and then not being able to stomach the losses when it swings down — and it does. It has big time, and then you lose money on this," he told Business Insider.
These funds can be included in tax-advantaged accounts, such as Roth IRAs and put in the care of a financial advisor.
Not everyone has been sold on the benefits. When the ETFs were first approved, crypto-enthusiast Kevin O'Leary questioned their worth, citing the accompanying fees. Depending on the provider, fees on spot bitcoin ETFs range anywhere from 0.15% to 0.90%.
Early discussions also considered the staying power of the funds amid heated competition.
ETFs may also put off some traditional crypto believers given that they set aside a foundational principle of bitcoin: self-custody.
In part, cryptocurrency was founded on the idea of a financial system free of banks and institutional exchanges, giving the buyer complete ownership of the token.
Meanwhile, investors who get exposure to crypto through a Wall Street fund are giving up on bitcoin's potential use as a means of exchange.
"If you think that the use case for bitcoin is highly centered on this, you need to own it yourself," Caratori said.
To buy bitcoin directly, investors can use crypto exchanges, online wallets, or peer-to-peer transactions. However, these methods may also come with fees, Caratori noted, citing that the average US transaction fee on a crypto exchange is about 1%.
Once purchased, security becomes a leading concern, and bitcoin owners will often take extensive measures to protect their password and bitcoin key from hacking or loss. Locked wallets can bar owners from cashing in on gains — this year, the crypto rally has sparked a surge in wallet retrieval attempts.
"Some people who hold it themselves, they write down their keys into these titanium plates that will survive a fire in their home," Caratori said, noting that ETFs free investors from those burdens.
In a note published Thursday, Bernstein analyst Gautam Chhugani said that the new ETFs effectively solve the "messy" complexity with crypto exchanges and crypto wallets.
"Also, household financial names marketing Bitcoin ETFs adds a halo of trust, legitimacy and branding to Bitcoin. ETFs become accessible in broker accounts and integrated with wealth advisors and private banks," he said.
Crypto-linked stocks
There's also a whole host of stocks that closely track bitcoin's movements, and can act as reliable proxies for the token.
Software firm MicroStrategy tops the list of bitcoin-linked stocks. The company's stockpile of 386,700 tokens, funded through debt issuance and equity sales, has effectively turned it into a gauge for bitcoin demand. The aggressive strategy has paid off, and MicroStrategy is up over 492% year-to-date compared to bitcoin's rise of about 135%.
Caratori told BI that regulation has further enhanced the upside. Given that the approved US ETFs don't permit everyone to invest in them, some institutional players have been left searching for alternatives.
For instance, Caratori noted that big investors in Europe are still restricted from these ETFs, pushing them toward MicroStrategy's stock or convertible securities issued by the company.
"They understand that they're paying a premium, but they would still rather be in than out."
Caratori acknowledged that MicroStrategy's use of leverage to buy could expose stockholders to increased volatility, though there's no sign of broader risk absent a major market crash.
Investors may also choose to buy crypto mining stocks, which are also highly correlated to bitcoin. So far this year, the CoinShares Valkyrie Bitcoin Miners ETF has increased nearly 74%.
Individual miners that have gained amid bitcoin's latest rally include Marathon Holdings, which is up 87% in the last three months, and Riot Platforms, up about 96% in that time.