Here’s How to Trade Cryptocurrencies Without Actually Owning Them

Bitcoin, Cryptocurrency, Options
by Rick Rouse

I often get asked about cryptocurrencies and whether they are safe investments to add to a portfolio. For investors unfamiliar with the term, a cryptocurrency is basically a digital token, or coin, that trades on a distributed and decentralized ledger called a blockchain.

Bitcoin gold coin

The most popular, and well known, cryptocurrency is Bitcoin, which made its debut in 2010 and dominates cryptocurrencies in terms of market capitalization and user base. It has truly been fascinating to watch the rise of Bitcoin as it first traded at just a fraction of a penny in 2010 to an all-time high price of nearly $65,000 in April of this year.

Bitcoin is back in a strong uptrend after struggling throughout September. The surge higher comes after some of the world’s biggest banks renewed their bullish bitcoin and crypto bets, as Bitcoin and cryptocurrencies have now become too large to ignore.

Bitcoin has become extremely volatile over the years and currently trades for about $54,000. Given its current momentum, it would not be too surprising to see a run towards all-time highs by yearend.

Other cryptocurrencies, such as Ethereum, Litecoin, Cardano, Dogecoin, and Polkadot, have also garnered renewed optimism and represent an alternative to Bitcoin. However, there are literally thousands of cryptocurrencies available to trade, with each carrying its own set of risks and rewards.

There are several platforms available on which to trade cryptocurrencies, with the most popular ones being Coinbase (COIN) and Cash App. The cryptocurrency industry has seen its share of fraudulent coins and shady exchanges, but Coinbase has largely avoided any controversy and is a publicly traded company.

Robinhood (HOOD) also offers an extremely easy-to-use app with no commission fees. It too, has recently become a publicly traded company. Once you choose your trading platform, all you need to do is fund your account, pick a currency, and do your homework.

Of course, the safety of these platforms is something else to consider as the cryptocurrency industry can be vulnerable to hackers and temporary delays in trading from time to time.

While Coinbase and Robinhood represent alternative stock investments, one of my favorite ways to trade Bitcoin indirectly is through the Grayscale Bitcoin Trust (GBTC). It is basically an exchange traded fund that invests in Bitcoin and mirrors the price action.

The chart shows GBTC recently made a solid breakout above its 50-day and 200-day moving averages while clearing key resistance at $42. The 52-week and all-time high is at $58.22. Support is at $38–$37 should shares fade from current levels.

You can also trade Grayscale’s Ethereum Trust (ETHE), which has also had a nice uptrend this month and had more daily trading volumes in September than GBTC did for the first time in history.

GBTC and ETHE do not trade options but are great ways to give investors who like to trade stocks an attractive way to participate in Bitcoin and Ethereum. You can directly trade these two through your brokerage account without having to worry about opening another account to fund cryptocurrencies.

Author: Rick RouseRick uses “cheap” slightly out out-of-the-money call and put options. His recommendations are based on both a fundamental and technical analysis. Rick has shown how just a 5%-10% move in a stock can generate consistent 100% winners in a short time period within 2-6 weeks. He uses tight Limit Orders and Stop Limits to get his members into bullish and bearish trades while protecting profits and limiting losses. He is not a bull or a bear as he believes you can make just as much money in an up market as you can in down markets.