Direct vs. indirect exposure

As cryptocurrency adoption matures, investors must decide how they want to participate in the market. At its core, this choice comes down to two distinct paths: direct exposure, which involves holding crypto itself (whether purchased on an exchange or through regulated spot ETFs that hold actual crypto), and indirect exposure, which means owning securities of companies and funds tied to the crypto sector, such as mining stocks, blockchain technology firms, or ETFs holding these equities.

In this chapter, we explore the differences between these two paths, compare their performance and risks, and help investors determine which approach—or combination—best aligns with their investment strategy. While both approaches offer advantages, they also require trade-offs that may influence the decision.   

What is direct exposure?  

Direct exposure means owning the underlying digital asset, like bitcoin or ether. This can be done natively by purchasing on a crypto exchange and holding in a private wallet, or indirectly through a regulated spot ETF that itself holds bitcoin and stores it with a licensed custodian. Both methods give the investor a position tied directly to the price movements of the crypto asset itself. Direct ownership through an exchange or wallet offers maximum control (and potentially access to DeFi income opportunities), but also places full responsibility for custody, security, and key management on the investor. Direct ownership via spot ETFs removes the technical complexity while still providing regulated, asset-backed exposure—but comes with management fees and possible tracking differences. In any case, both solutions enable the investor to track the digital asset performance. 

Another form of indirect exposure to crypto comes through derivatives, such as futures and options. These financial instruments allow investors to speculate on the price movement of cryptocurrencies like bitcoin and ether without owning the underlying asset. Futures contracts oblige the buyer to purchase (or the seller to sell) a specified amount of crypto at a predetermined price on a future date, while options give the investor the right, but not the obligation, to do so.

Crypto derivatives are typically traded on regulated exchanges like CME Group in the U.S., offering institutional-grade access with standardized contracts and oversight. They can be used for hedging, leveraging positions, or expressing short- or long-term views on price movements. However, derivatives carry their own risks: they are complex instruments that can amplify both gains and losses, and they often require a margin account and an understanding of advanced trading strategies. As such, they are more suitable for experienced investors with higher risk tolerance.

While derivatives don’t grant any claim to actual crypto holdings, they play a critical role in market liquidity and price discovery, making them an important component of the broader crypto investment landscape.

What is indirect exposure?

An alternative to owning cryptocurrencies directly is to gain indirect exposure through investment products such as exchange-traded funds (ETFs) or proxy stocks. Proxy stocks include companies like Strategy, which holds the largest bitcoin reserve among publicly listed firms, or bitcoin mining companies—such as CleanSpark, Hive Digital Technologies, and Marathon Digital Holdings—that process transactions and secure blockchain networks.

Indirect exposure offers a simplified entry point to the crypto sector. These investments trade on traditional stock markets and are accessible via standard brokerage accounts, allowing investors to integrate them seamlessly into diversified portfolios. They also benefit from the regulatory protections applied to conventional securities, while eliminating technical hurdles—such as setting up wallets or managing private keys—since the issuer or company handles custody of the underlying crypto assets.

However, investors are buying into the performance of the company or fund, not the cryptocurrency it may hold, meaning results can diverge sharply from crypto price moves due to business execution, management decisions, or sector-specific risks.

For those seeking broad exposure without assuming the operational risks of direct ownership or relying on a single company, there are crypto-themed ETFs that hold a basket of stocks, such as mining firms or blockchain infrastructure providers.

Because these products are readily available through brokerage accounts, they represent an attractive choice for investors who believe in the long-term potential of the crypto industry but prefer a convenient and lower-risk alternative to holding crypto assets directly.

Which approach is right for you? 

Direct exposure aligns investment outcomes closely with crypto asset performance, for better or worse, while indirect exposure adds an extra layer of company- or fund-specific variables that can either dampen or amplify the effect of crypto price movements.  Ultimately, the choice between direct and indirect exposure depends on an investor’s comfort with custody, preference for regulatory protections, tolerance for operational risk, and investment objectives. Some investors combine both approaches, using direct exposure for pure price tracking and indirect exposure for diversified participation in the crypto industry’s growth. It is possible to go though both approaches through ETFs, such as bitcoin ETFs that are regulated financial instruments offering direct price tracking without the operational burden of self-custody, and equity-based crypto ETFs that offer diversification within the crypto sector but no claim to actual tokens.