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As the Securities and Exchange Commission punts decisions on approving bitcoin exchange-traded funds, companies have created other options to meet the growing demand for cryptocurrency.
One alternative, bitcoin trusts, holds the digital currency, making it easier for investors to add cryptocurrency to their portfolios.
“You’re more or less buying a basket that has bitcoin inside of it,” said financial planner Zechariah Schaefer, founder of Ascent Personal Finance in Lynchburg, Virginia.
Bitcoin trusts allow investors to buy exposure to the digital currency through brokerage or retirement accounts without the wallet, key or storage concerns of cryptocurrency exchanges.
“The trusts are just an easy way for investors to get access to the underlying bitcoin without buying it directly,” said Tyrone Ross, CEO of Onramp Invest, a company providing “cryptoasset” management technology to financial planners.
While bitcoin trusts may offer a simpler way to invest in cryptocurrency, there are downsides to consider, financial advisors say.
What to know before investing
A bitcoin trust operates differently than a mutual fund or ETF. These trusts periodically sell a limited number of private shares to so-called accredited investors, who meet strict income, net worth and experience requirements.
Later, those accredited investors may sell their shares through public markets. But the prices may not match the