Cryptocurrency has emerged as a groundbreaking digital alternative to traditional financial systems, offering new ways to store value, make transactions, and invest. While still evolving, this technology is reshaping how people think about money, ownership, and financial independence. Whether you're new to digital assets or looking to expand your investment knowledge, understanding the fundamentals—and your available options—is essential.
What Is Cryptocurrency?
Cryptocurrency is a digital or virtual form of currency designed to work as a medium of exchange. Unlike physical money issued by governments or central banks, cryptocurrencies exist entirely in electronic form as tokens or “coins.” These are secured by cryptography and operate on decentralized networks based on blockchain technology—a distributed ledger that records all transactions across a network of computers.
Because there’s no central authority controlling supply or validating transfers, cryptocurrency enables peer-to-peer transactions without intermediaries like banks or payment processors. This means faster, borderless transfers with lower fees—especially for international payments.
👉 Discover how blockchain technology powers the future of finance.
Why Cryptocurrency Matters
While still in its relative infancy, cryptocurrency represents one of the most significant innovations in modern finance. It challenges long-standing models of centralized monetary control and opens doors to greater financial inclusion, particularly for unbanked populations worldwide.
Bitcoin, the first and most well-known cryptocurrency, was introduced in 2009. Since then, more than 10,000 different cryptocurrencies have been developed, each serving unique purposes—from facilitating smart contracts (like Ethereum) to enabling digital art ownership through NFTs, and maintaining price stability via stablecoins.
The core appeal lies in decentralization, transparency, and user empowerment. Supporters believe these features make crypto resilient against inflation and government overreach, though regulatory frameworks continue to evolve.
Types of Cryptocurrencies You Should Know
Not all cryptocurrencies serve the same function. Here are some major categories shaping the ecosystem:
- Bitcoin (BTC): Often called “digital gold,” Bitcoin is primarily used as a store of value and speculative asset.
- Ethereum (ETH): More than just a currency, Ethereum is a platform for decentralized applications (dApps) and smart contracts. It's also the backbone of most NFT marketplaces.
- Stablecoins: Designed to minimize volatility, stablecoins like USDT or USDC are pegged to fiat currencies such as the U.S. dollar.
- Altcoins: A broad category covering all non-Bitcoin cryptocurrencies, including Litecoin, Solana, and Cardano.
Each type carries different levels of risk, utility, and growth potential—making diversification important for investors.
The Risks of Investing in Crypto
Despite its promise, cryptocurrency remains a highly speculative asset class. Key risks include:
- High volatility: Prices can swing dramatically in short periods due to market sentiment, regulatory news, or macroeconomic trends.
- Limited regulation: Most cryptocurrencies aren’t regulated like stocks or bonds, increasing exposure to fraud and manipulation.
- No investor protections: Unlike bank deposits insured by the FDIC or brokerage accounts covered by SIPC, crypto holdings are not protected if lost or stolen.
- Technology risk: Wallets can be hacked, private keys lost, and platforms compromised—once funds are gone, recovery is nearly impossible.
Additionally, products tied to cryptocurrency—such as crypto trusts and Bitcoin futures ETFs—may not perfectly track the underlying asset’s price due to structural limitations or market inefficiencies.
👉 Learn how to navigate crypto volatility with smart investment strategies.
Frequently Asked Questions
Q: Can I buy cryptocurrency directly through Ally Invest?
A: No, Ally Invest does not currently offer spot trading for cryptocurrencies. However, you can gain indirect exposure through crypto-related financial products.
Q: What are crypto trusts?
A: Crypto trusts are investment vehicles that hold actual cryptocurrency and issue shares traded on public markets. They allow investors to gain exposure without managing wallets or private keys.
Q: How do Bitcoin futures ETFs work?
A: These funds invest in futures contracts betting on Bitcoin’s future price rather than holding Bitcoin itself. They provide regulated access but may diverge from spot prices over time.
Q: Are crypto stocks a safe way to invest in digital assets?
A: Crypto stocks refer to shares in companies that hold or use cryptocurrency (e.g., Coinbase, MicroStrategy). While less direct, they’re subject to both crypto market swings and general stock market risks.
Q: Is cryptocurrency legal in the U.S.?
A: Yes, owning and trading cryptocurrency is legal in the United States, though regulations vary by state and federal agency. Tax reporting is required for all transactions.
Q: Do I need a digital wallet to invest indirectly in crypto?
A: No—if you're investing through ETFs, trusts, or stocks, your brokerage handles custody. Wallets are only needed if you're buying and holding actual coins.
Indirect Ways to Invest in Cryptocurrency
If you're interested in participating in the crypto market without the complexity of managing digital wallets or navigating exchanges, several indirect investment options are available:
1. Crypto Trusts
These private investment funds hold actual cryptocurrency and issue tradable shares. For example, the Grayscale Bitcoin Trust (GBTC) allows investors to buy shares representing Bitcoin ownership without needing a wallet. However, they often trade at premiums or discounts to net asset value and come with higher fees.
2. Bitcoin Futures ETFs
Exchange-traded funds that invest in Bitcoin futures contracts offer another route. Since they’re traded like regular stocks, they fit easily into traditional portfolios. But because they don’t hold actual Bitcoin and rely on derivatives pricing, performance may lag behind real-time price movements.
3. Crypto Stocks
Investing in companies deeply involved in the crypto space—such as exchanges (e.g., Coinbase), mining firms (e.g., Marathon Digital), or corporations holding Bitcoin on their balance sheets (e.g., MicroStrategy)—provides exposure through familiar equity channels. These stocks tend to correlate with crypto markets but also reflect broader business performance.
👉 Explore secure and simple ways to start your crypto investment journey today.
Getting Started with Confidence
If you already have an Ally Invest Self-Directed account, accessing crypto-related investments is straightforward. Simply log in and navigate to the Research section to explore available crypto trusts, futures ETFs, and relevant stocks. Always review associated fees, expense ratios, and risk disclosures before investing.
Remember: while indirect exposure reduces technical barriers, it doesn’t eliminate market risk. Stay informed, diversify wisely, and only allocate funds you can afford to lose.
Final Thoughts
Cryptocurrency is more than just a trend—it's a technological shift with long-term implications for global finance. While direct ownership requires technical know-how and risk tolerance, indirect investment options make it accessible to mainstream investors seeking innovation without complexity.
As regulations mature and adoption grows, staying educated will be key. Whether you choose to dive deep into blockchain technology or take a measured approach through ETFs and stocks, informed decisions lead to smarter outcomes.
Keep learning. Stay cautious. And always align your investments with your financial goals.