Every week, there’s a new crypto ‘I got rich!’ story and a new ‘I lost it all!’ story. If you’re curious but cautious, this is for you.
Key Takeaway: Crypto ETFs can diversify your portfolio, maybe even futureproof your finances, and discussing them will definitely make your holiday dinner arguments spicier. But like hot sauce, you don’t need to dump the whole bottle on your burrito to enjoy it.
Understanding the Opportunity
So, why might someone invest in cryptocurrency? There are a few solid reasons – especially if you’re thinking long term.
- Crypto offers a different way to manage and grow your money. It’s decentralized, so it doesn’t rely on banks or governments, and a lot of people like the transparency and security built into the tech.
- It can be a great diversifier. Crypto doesn’t always move the same way as stocks or bonds, so even a small allocation can diversify and reduce overall risk to your portfolio.
- Yeah, it’s volatile. But assets like Bitcoin and Ethereum have seen huge growth over the years.
Bottom line: If you believe the world’s going to become more digital and decentralized, crypto’s one way to invest in that future.
Know What You’re Dealing With
Crypto isn’t just “magic internet money.” Each coin has its own purpose and ecosystem.
- Bitcoin = Digital gold. People treat it as a store of value: it has a capped supply, ensuring its scarcity.
- Ethereum = The App Store of blockchain, a platform where anyone can build and use apps that run without middlemen. It’s basically Web3’s operating system.
- Solana = Ethereum’s faster, cheaper cousin. Aims to be the decentralized Nasdaq. Big in NFTs and “pls don’t lag” transactions...
- XRP = XRP is built for one thing: moving money across borders. Think “international Venmo” with fewer fees and fewer angry bank wires.
Different coins, different jobs, different investments. Before you invest in any of them, know what each one is actually for.
Getting Exposure: The Smart Way In
There are many ways to invest in crypto, but they’re all a bit different. Here’s the breakdown:
Digital Wallets vs. ETFs
- Digital Wallets: You can invest in Bitcoin directly (or through “self-custody” as the crypto natives would say). This is great if you want full control, but it’s also more complicated, requiring digital keys and wallets. Plus, it runs you the risk of becoming one of those stories…
- ETFs: Like crypto training wheels. You buy it like a stock, no special keys or digital wallets required, and yes – you can hold it in your TFSA or RRSP if you’re Canadian. Super straightforward.
Futures-Based vs. Spot Crypto ETFs
The catch with crypto ETFs is that they’re not all built the same. There are two main types: futures-based ETFs and spot ETFs.
- Futures ETFs = betting on price movement, kinda like gambling on a horse without owning the horse.
- Spot ETFs = actually hold the Bitcoin. You own the horse.
Full disclosure, at Purpose Investments, we launched the world’s first spot Bitcoin ETF back in February 2021, so yeah, we’re biased. Why ‘spot’? Because we believe it’s the cleanest and easiest way to get exposure to pure Bitcoin.
If you want more direct exposure, look for a spot crypto ETF, like Purpose Bitcoin ETF (TSX: BTCC) or Purpose Ether ETF (TSX: ETHH). These ETFs actually hold the crypto (whether that be Bitcoin, Ether, or XRP), not just a price guess.
Bottom Line: Spot crypto ETFs can be a smart, easy way in. Just make sure you know what kind of ETF you’re getting into.
If you want to explore our crypto ETF suite at Purpose Investments, download our digital asset guide here, your source for a non-jargon take on investing in this stuff.
Staying Sane (and Protecting Your Portfolio)
Crypto is volatile – there’s no sugarcoating that. But if you believe in its long-term utility, don’t let short-term swings scare you off.
Here’s what research shows:
- First off, crypto doesn’t really move in sync with stocks or bonds. That low correlation may actually help reduce overall risk in a portfolio.
- Even small allocations – like 1 to 5% – have been shown to improve risk-adjusted returns in portfolios.
- When researchers looked at back-tested portfolios that included a little crypto, especially Bitcoin, they often outperformed the ones without it.
Going back to the hot sauce metaphor, where crypto is concerned, consider adding enough to spice things up, not enough to ruin your burrito.
The Takeaway
At the end of the day, it’s a personal choice. Do your homework, talk to a financial advisor, and if you’ve got questions – we’re always here to help at Purpose.
If you want more info on this topic, download our intro guide to investing in digital assets here.
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