3 Ways to Invest in Crypto: Wallets, Exchanges, and Funds

There are plenty of ways to invest in crypto and make a profit. For example, you can use a wallet or a brokerage account on an exchange. Now crypto stocks are even available on the market. Let us look at a few instruments that you can use for investing in crypto.

Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.

Key Takeaways

• There are two basic approaches to investing in crypto: research-based (in-depth analysis of the project) and trading-based (speculating on market movements). You can combine them in your strategy.

• Three main tools:

  • Custodial exchanges and brokers are convenient and simple, but you have no control over your keys.
  • Funds, trusts, and ETFs — a regulated method through the traditional market, but without direct ownership of coins.
  • Self-custodial wallets give you complete control and independence but require responsibility and technical literacy.

• Crypto remains a high-risk asset: you can make money, but you can also lose everything. Only invest what you are prepared to lose.

Two Approaches to Investing in Crypto

The investment approach is a kind of research. Before investing your money, you explore a coin, its blockchain, and the crypto project. It is important to immerse yourself in a project to find out more details and protect yourself from scam activity. After researching, you can make a decision about the amount of your assets and whether you want to invest in this crypto project or not.

The trader approach is more stressful because it depends on changes in the crypto market. You buy and sell coins depending on market conditions.

In addition, you need to build your crypto investment strategy first. In this case, the two approaches might serve as the basis for the strategy. Of course, you can combine these approaches if you want. For example, you may explore a crypto project first and then look at the behavior of market participants — and vice versa.

Instruments for Investing in Crypto

Custodial Crypto Exchanges and Brokerage Services

The purchase and storage of coins take place in the service’s account, not at your personal blockchain address. For example, users of Coinbase, Binance, Kraken, and other exchanges store their purchased Bitcoin in these companies’ internal wallets. Similarly, customers of fintech applications (Robinhood, Revolut, PayPal, etc.) can buy cryptocurrency without even creating a separate wallet.

How it works: investors register on the platform, undergo KYC/AML procedures (if required by regulators), and purchase cryptocurrency with fiat money. Coins are credited to the account balance, but private keys are stored by the company.

Pros:
✅ Using custodial exchanges and brokers relieves investors of the technical complexity of storing cryptocurrencies. There is no need to understand wallets, seed phrases, or blockchains — all you need is a familiar application interface.

✅ Large regulated platforms provide a certain level of protection and redundancy: for example, the exchange stores customer assets in cold storage, uses insurance funds, and users can restore access to their accounts through support if they lose their passwords.

✅ A trading account allows you to quickly buy or sell crypto assets at any time without waiting for confirmation on the blockchain.

Cons:
❌ The main drawback is “not your keys, not your coins.” While your BTC is stored on an exchange, you have no control over your private keys, which means you are dependent on the integrity and reliability of a third party.

❌ The custodian company could theoretically restrict access to funds by decision of the authorities or due to internal problems.

❌ There have been real cases of exchange hacks or even fraud by employees, resulting in users losing their investments. For example, the Thodex exchange closed in 2021, stealing about $2 billion from customers.

❌ The platform may impose withdrawal restrictions (as in some fintech applications) or delays.

Cryptocurrency funds, trusts, and ETFs

Another approach is to invest in cryptocurrency-related derivatives traded on traditional markets. This provides exposure to the price of Bitcoin or another coin without directly purchasing cryptocurrency and without the need to store it. This category includes cryptocurrency funds (trusts), exchange-traded funds (ETFs/ETNs/ETCs), and similar products.

For example, BlackRock launched the first spot Bitcoin ETF under the ticker iShares Bitcoin Trust (IBIT). This fund immediately attracted huge demand: in less than a year, its assets exceeded $70 billion, making it the fastest-growing ETF in history.

Read more: Inside the Minds of Financial Giants: Investment Approach from BlackRock and Murano

Pros:
✅ Funds and ETFs make investing in crypto as simple and regulated as possible. You work with cryptocurrencies in the same way as with fiat.

✅ Funds are supervised by financial regulators (the SEC, European regulators), which reduces the risk of fraud and increases trust.

✅ You can buy or sell ETF shares instantly during exchange hours without waiting for network confirmations. In addition, such securities are easily integrated into a diversified portfolio: they can be held together with stocks, bonds, and other assets and are accounted for by familiar infrastructures (custodians, clearing houses). This means less risk of losing your seed phrase or making a transaction error.

Cons:
❌ An investor who buys, for example, an ETF does not directly own the cryptocurrency itself. This means that they cannot withdraw Bitcoin from the fund to their own address (unless they sell their shares and buy the coins separately).

❌ Funds charge management fees (usually 0.15–2% per year), which reduce the investor's return over time.

❌ Trusts such as GBTC have historically had a problem with the price of shares deviating from the market price of Bitcoin — they were traded at a premium or discount, which added market risk. This also affects profits.

❌ Issuer credit risk: investors trust the company with their money, assuming that it actually holds the asset and will be able to pay them back. But you can never be completely sure.

Self-Custodial Wallets

A wallet is not just an application but your personal tool for interacting with the blockchain. It allows you to own and manage crypto assets directly, without intermediaries.

Pros:
✅ Only by possessing private keys can you truly control your cryptocurrency: no bank or company can freeze or confiscate your coins as long as you hold the keys.

✅ You can transfer them at any time, to anyone, without permission. There are no restrictions on the amount or direction of the transfer (except for technical network limitations). You can also personally participate in blockchain activities: for example, exchange cryptocurrency through DeFi protocols, invest in new tokens on decentralized platforms, use coins in smart contracts, earn income from staking, or simply spend them on goods and services from merchants that accept crypto.

✅ High level of confidentiality — for example, Coin Wallet never requests KYC or other personal information.

✅ Cryptocurrencies were created as an alternative to the banking system, and by keeping them in your wallet, you are withdrawing part of your capital from the traditional system. This is a hedge against systemic risks: for example, a bank may go bankrupt or freeze deposits, or a broker may encounter problems. Bitcoin in your wallet, on the other hand, does not depend on anyone else's management mistakes.

Cons:
❌ Your private key or seed phrase is the only way to access your coins. If you lose them, forget them, or they are irretrievably lost, access to your coins will be impossible to restore.

❌ Phishing sites, computer viruses, and compromised mobile applications — all of these pose a threat to crypto wallets. Unlike bank cards, where transactions can be disputed, crypto transactions are irreversible. If an attacker gains access to your key and transfers your coins, there is no way back.

❌ Working with your own wallet requires a certain level of technical literacy.

What To Consider When You Are Investing In Crypto?

Not touching your assets and doing nothing is often the hardest but usually the smartest play. This means you should not succumb to market manipulation.

Keep in mind that crypto is always volatile.

Only invest an amount you can afford to lose.