How to invest in bitcoin without buying it directly?

The bitcoin price is extremely volatile. The cryptocurrency has been challenged since its all-time high of $69,000 on November 10, but it is showing strong long-term growth and could grow further in the years to come, especially if its use increases and large companies accept it alongside “traditional” currencies. If you want to invest in bitcoin, and bet on an increase in its value over time, you can go through a cryptocurrency exchange platform to get it directly.

In this case, you must have an electronic wallet and imperatively retain the password allowing access to it, under penalty of losing your assets. Many users have never gotten their hands on their cryptocurrency. If you instead go through a specialized broker, such as Coinhouse, the first in France, he will be able to take care of the funds. But there is yet another option for investing in bitcoin, this time without direct exposure to cryptocurrency, instead betting on companies operating in the industry.

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Invest your money in company stocks

To do this, there is no need to make a selection yourself, which would require very specific knowledge of the subject. Investment professionals have already taken care of this. You can therefore already subscribe to funds which group together various shares of listed companies, whose activity is closely linked to cryptocurrencies or which have decided to invest in bitcoin.

“It allows you to bet more on the technology behind bitcoin – the blockchain – rather than just buying a speculative asset,” explains Vincent Boy, market analyst at broker IG. “These funds make it possible to invest in companies in the sector, which can evolve according to the use of the blockchain. Even if the cryptocurrency drops a little, these tech companies could still make significant progress.”

In France, two asset management companies have launched such funds, intended for the general public and approved by the Financial Markets Authority (AMF).

An unlisted fund

Tobam, which claims 10 billion dollars under management, thus offers a fund made up of “four categories of shares”, explains its president and founder Yves Choueifaty: shares of mining companies, trading platforms, companies that are developing technologies related to cryptocurrencies and groups that have invested heavily in bitcoin. In total, about forty companies are represented.

Mining is the activity that validates transactions in bitcoin and other cryptocurrencies on blockchain technology. The Canadian miner Bitfarms, for example, is part of the Tobam ​​fund, dubbed “BTC Linked and Blockchain” (BTC being the stock symbol for bitcoin). There is also the American cryptocurrency exchange platform Coinbase, the American company Galaxy Digital, specializing in financial services related to digital assets and the blockchain, or even Nvidia, manufacturer of electronic chips, components essential to the functioning of mining machinery.

Also included in this fund is the software publisher MicroStrategy, which stands out for its investments in bitcoin and had $2.41 billion in bitcoin on its balance sheet as of September 30, according to the Wall Street Journal.

In addition, the “BTC Linked and Blockchain” fund is invested up to 10% in another fund launched at the end of 2016 by Tobam. The latter, invested 100% directly in bitcoin, is reserved for professional investors.

Launched on October 22, 2021, the “BTC Linked and Blockchain” fund is subject to annual management fees of 0.90%.

An ETF listed on Euronext

A second fund for the general public exists in France. Marketed by Melanion Capital, it obtained AMF approval in July 2021, to make its debut on Euronext Paris in October. This fund is therefore listed on the stock exchange, unlike the one offered by Tobam. It is an ETF (Exchange-Traded Funds), a fund whose purpose is to replicate the performance of an index or an asset (CAC 40, Nasdaq, etc.). In this case, the fund of Melanion Capital aims to reproduce the evolution of the price of bitcoin.

For this, the manager relies on a basket of shares of companies in the crypto and blockchain ecosystem. Called “BTC Equities Universe”, its fund “does not guarantee any level of correlation with the price of bitcoin”, specifies Cyril Sabbagh, head of ETFs for the company. “But in fact, we observe a correlation of about 80%,” he adds. Shares of companies similar to those present in the fund launched by Tobam ​​are included, such as Binance or MicroStrategy. Only companies with a market capitalization greater than $100 million were selected.

The mining sector is the most represented, with groups such as Marathon Digital, Argo Blockchain and Hut 8 Mining. “A stock cannot represent more than 10% of the ETF. We give more weight to the company when there is a higher sensitivity to the bitcoin price or a greater correlation”, explains Cyril Sabbagh. “We think we are on a bitcoin revolution. The goal is to go on the champions of tomorrow in the crypto sector.”


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Funds accessible via a securities account

Melanion Capital charges 0.75% annual management fees for its fund. Like Tobam’s “BTC Linked and Blockchain” fund, it is accessible via a securities account that you can open in a bank. On the other hand, you will not be able to subscribe to it via an equity savings plan (PEA), which only includes securities from French and European companies. “The stocks that are listed in the crypto ecosystem are mostly in North America,” says Cyril Sabbagh.

Tobam ​​and Melanion Capital’s funds can potentially be integrated into life insurance contracts. However, insurance companies and bank insurers are still very hesitant about cryptocurrencies and hardly offer this type of fund… for the moment.

ETF-type funds (listed index funds) or ETPs (listed index products) linked to bitcoin and cryptocurrencies multiplied in 2021, particularly in North America and Europe. No less than 75 were born last year, bringing their total to 92, according to Les Echos. Promoted by players such as the American CoinShares, the Swiss fintech 21Shares, the manager VanEck or even ETC Group, these funds are directly invested in bitcoin or other crypto such as ether, or indirectly through company shares. sector, such as the consumer funds of Tobam ​​and Melanion Capital.

While they can be accessed via a securities account, some have a very complex operation, based on derivative products, and remain reserved for professional and informed investors, who have a good command of the operation of financial instruments and cryptocurrencies.

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