What’s half of the battle of becoming a responsible Bitcoin owner? Putting in the appropriate time and effort to understand this revolutionary asset and build conviction in your position. Less discussed is the multitude of distinct ways an investor can gain exposure to bitcoin. Each method offers its own set of advantages, of course. 

Hardcore Bitcoiners recommend managing your private keys in cold storage. Legacy investors, on the other hand, swear the GBTC is the ideal way to gain exposure. Beyond these two options, there are a number of other opportunities to gain indirect exposure to the asset to best fit an individual’s unique investing needs. Let’s break down all the ways to theoretically “own” or be “exposed” to the asset, along with their pros and cons.

Direct Ownership

First, and the most obvious method of owning Bitcoin, is purchasing it directly from an exchange. Unleveraged spot Bitcoin can comfortably sit on your exchange, digital wallet, cold storage device, or physically on paper. As the popular mantra goes, “not your keys, not your coins.”

With access to the private keys, you have full control over the asset (assuming only you have access to the private keys). As expected, price exposure here depends on the market value of the asset. By simply owning Bitcoin, you avoid the layered risk factors of indirect or secondary exposure.

The major downsides to directly owning Bitcoin are that it:

  • isn’t recognized by financial institutions as collateral.
  • can seem complicated for newcomers.
  • requires the responsibility of custody.

For the time being, you can’t go to your bank and borrow against it. It’a also not considered to be a viable portion of your net worth. Michael Saylor, the CEO of MicroStrategy, a business intelligence company that loves buying Bitcoin, argues the disallowance of borrowing against Bitcoin will change with time. If you’re not already familiar, here is a great starting point to get you up to speed –  What Is Bitcoin.

Indirect Ownership

The second method to purchase Bitcoin is the plethora of apps catering to the retail masses i.e., Robinhood, PayPal, Venmo, Cash App, etc. The major distinction here? These apps offer a friendly user experience at the expense of accepting centralized custody and limited platform flexibility. The trend appears to be moving towards allowing withdrawals. Cash App now offers this, and PayPal is planning to roll it out. But it is currently the exception to allow withdrawals, not the rule. Fees are highest on these apps, purchase limits are low, and the list of supported coins is quite small.

Lacking the ability to withdraw your crypto may seem like a minor issue. But the truth is, a centralized authority holds your private keys rather than you. On these platforms, your on-screen balance only shows the value held, not what you own. In the event of a government crackdown, these platforms would be targeted first. In the event of a hack, there isn’t much you can do to protect your assets. Additional risk adds up here, such as when Robinhood shut off the “buy button” during the GME fiasco. Nobody can predict black swan events, but forfeiting the ownership of your asset to a centralized authority opens an additional set of alternative risks.

On the opposing side of the indirect exposure spectrum is the Grayscale Bitcoin Trust. It offers Bitcoin exposure to individual and institutional investors in a public and private form. GBTC has been praised as a phenomenal alternative for the crypto space, since an ETF is yet to be approved by the SEC. It functions very similarly to an ETF and is the easiest way to gain exposure to Bitcoin without having to worry about custody. It is not without issues, however. The product often trades at extreme premiums and discounts to NAV and is structurally flawed. Regardless, it is the best option that investors have in the United States for investing in Bitcoin through legacy systems.

A common misconception is that GBTC is only designed for investors ready to purchase a $50,000 minimum and commit to a 6 month lock up. This is only partially true. It’s also offered as a public stock on exchanges without a minimum investment requirement or lock up. If you want to read my entire thoughts on GBTC And The Impact Of An ETF, read this article.

Exposure To Bitcoin On The Balance Sheet

MicroStratgey is the obvious example of a company that has taken their cash reserve, bought Bitcoin, and offered equity in the company in the form of public stock. In theory, the performance of MSTR stock should be a hybrid of the company’s success and Bitcoin’s price increase. Their strategy to leverage debt to acquire more Bitcoin added a layer of risk to MSTR. The advantage of this is increased volatility in Bitcoin price swings. It often behaves like a correlated Bitcoin accelerator. It catches headlines, draws in retail hype, offers viable exposure to institutions, and operates at a much smaller market cap versus Bitcoin.

The less obvious example of Bitcoin on the balance sheet is a Bitcoin or crypto mining company such as Riot Blockchain or Marathon Digital Holdings. Profitability of these companies depends on a matrix of variables. This includes delivery of machines, a growing network hash rate, debt restructuring, leadership, price of electricity, looming regulations, and more. Due to the structure of these companies, they reinvest the majority of revenue to scale the operation and keep up with a growing market.

These companies deploy a strategy to continue to acquire more Bitcoin at a discount, and repeat the process. These stocks also behave like an accelerant to the natural price of Bitcoin. Often, they react with 2-3x the volatility of a Bitcoin price swing. Investors can think of mining stocks as an infrastructure play / leveraged position on Bitcoin. Companies with Bitcoin on the balance sheet are a hybrid of indirect exposure. Mining companies, on the other hand, are a pure opportunity at indirect exposure to the sector and asset at a fundamental level. For a deeper look into mining stocks, read this article –  mining stock right for your investment portfolio.


The last way to gain exposure to Bitcoin is through derivative products. Investors often call this synthetic Bitcoin. The price of these products changes based on the price of the underlying asset, along with demand for the product. A key distinction is that demand for the product is far different than demand for the asset. You can interact with crypto derivatives  1 of 2 ways – either on crypto exchanges like Binance and Phemex or through legacy platforms such as the CME.

As you can probably guess by now, the product does not offer the user private keys, nor can you transfer it on a blockchain. Like a share of a stock, the contract lives on the issued platform and always has an expiration date, unlike the underlying asset. The legacy side of futures products has only begun to scratch the surface of what is possible.

Just recently, for example, the CME began offering downsized Ethereum products to attract smaller investors. For institutional traders, crypto futures products are a hedging tool to de-risk a large position. For retail traders, these products are often abused to leverage the money they have invested in hopes of hitting it big.

Used properly, derivative products can be a weapon in your arsenal. Used improperly and they can drain your savings nearly instantly. I saved derivatives for the end because they are by far the most advanced form of indirect Bitcoin exposure, and probably not suited for most traders or investors.

It should be clear that no single exposure method is superior, rather each offers their own set of advantages and drawbacks – ultimately adding exposure diversity to the market. As with any asset, whether it be synthetic, indirect, or secondary exposure, the same rules apply for investing, Buy The Dip, HODL, Repeat.