UBS Group Suggests Alternate Ways of Investing in Cryptocurrencies

Switzerland’s largest investment bank, UBS Group, recently suggested some strategies for investors seeking to gain exposure to crypto-assets with less risk than investing directly in Bitcoin, Ethereum, or other cryptocurrencies. 

A UBS analyst said:

“There are several main ways investors can access this potential while avoiding the high volatility and regulatory risks of holding bitcoin or rival cryptos.”

Looking at Safer Options

In a research note published by the UBS Global Wealth Management team on alternative investments to directly holding cryptocurrencies, the analysts opined that BTC’s recent fall from all-time high last year ‘has undermined two of the most common defenses of the asset class.’

First is the notion that cryptos provide an effective form of diversification from traditional financial assets and the second is that it provides protection against elevated inflation.

While direct exposure to cryptos is ‘highly speculative’ the bank analysts also noted that ‘it does not mean that the technology underlying digital assets holds no promise for investors.’

The bank further suggested to investors that there are several ways in which investors can access cryptocurrencies’ potential while avoiding the high volatility and regulatory risks of holding Bitcoin or altcoins. 

The first strategy according to the bank’s analysts is to invest in companies that build the necessary infrastructure for the crypto ecosystem, citing that they are likely to benefit from the more widespread use of distributed ledger technology (DLT) applications.

While the second investment opportunity could be with the platform companies that can embrace DLT-based applications.

In January, UBS warned of a crypto winter amid expectations of Fed rate hikes and regulation. On the contrary in May last year, UBS was reportedly planning to offer its wealthy clients exposure to cryptocurrencies as per a BNN Bloomberg article. Seemingly, the bank had some mixed views on the asset class. 

USB’s suggestions for investors mostly revolved around DLT applications and companies, however, there are other ways in which one can invest indirectly in cryptocurrencies. 

Indirect Investment in Crypto

There are many indirect ways to invest in cryptos, one of the most known ways is to purchase stock in a company with a high financial stake in the future of cryptocurrency or blockchain technology. However, this method too involves some risk or exposure to volatility. 

Nowadays, investors have taken to diversification by investing in diversified index funds or ETFs which have a proven record of long-term growth in value. 

Another way to gain exposure to cryptocurrencies is to invest in companies that have a stake in the cryptocurrency industry like Coinbase (COIN), for instance.

More recently, Bitcoin mining ETFs have come into the picture which allows investors to put their money on BTC mining without actually undergoing many of the risks associated with it.