Bitcoin hit a record high this week as investors continued to pile into cryptocurrency assets in the wake of several positive regulatory moves in the US this year. Standard Chartered reckons Bitcoin will hit $200k by the end of the year as US lawmakers embark on debating a series of bills in Congress that could create a clearer regulatory framework for digital assets.

The question we keep getting asked is whether it’s possible to invest in Bitcoin, Ether or any other cryptocurrency in a stocks and shares ISA.

The answer is Yes, but only indirectly. A stocks and shares ISA allows you to invest in securities quote on the stock exchange such as Shares, Exchange-Trade Funds (ETFs) and Investment Trusts.

ETFs that invest in Bitcoin and other cryptocurrencies would be the most obvious way to invest indirectly in the sector without requiring a crypto wallet. However, currently the UK regime bars retail investors from accessing these products. In June the FCA proposed lifting the ban, highlighting the regulator’s desire to align the UK regime with other countries. That could mean investors will soon be able to access, for instance, the iShares Bitcoin Trust ETF (IBIT), which invests directly in the digital asset.

But until this happens there are other pathways to explore if you are seeking crypto asset exposure.

There are several ways to use your ISA to invest indirectly in cryptocurrencies.

Individual Stocks

Several US-listed companies offer investors indirect exposure to Bitcoin and other cryptocurrencies. MicroStrategy (MSTR) – recently rebranded to Strategy – is perhaps the best known. It offers a leveraged play on Bitcoin through an aggressive corporate bitcoin purchasing strategy. Interestingly, the stock trades at a premium to the value of the Bitcoin it holds, its net asset value (NAV), excluding the value of its legacy software business. This implies two things – one is a strong momentum behind CEO Michael Saylor’s HODL narrative; and a requirement for MSTR to continually access capital markets to keep finding new buyers of its debt/stock.

MSTR has issued three classes of perpetual preferred shares – Strike (STRK), Strife (STRF) and Stride (STRD), which offer potentially high discretionary dividends. The idea is to raise as much money as possible to buy as much Bitcoin as possible. The strategy works as long as Bitcoin keeps rising in value, as it allows MSTR to keep raising fresh capital to buy more BTC, which in turn supports the price of the digital asset. But how long can the show stay on the road is anyone’s guess.

MSTR recently bought 4,225 more Bitcoin to take its holdings to 601,550 BTC – valued at approximately $73bn.

Coinbase (COIN) is another way to indirectly invest in cryptocurrencies. It’s a trading platform for crypto that has seen its revenues surge since Donald Trump came back to power and reignited the market by creating a more favourable regulatory regime. It’s also managed to diversify its business from a purely retail crypto platform to focus on institutional custody services and prime broking.

Other names to consider include miners MARA Holdings (MARA), Core Scientific (CORZ) and Riot Platforms (RIOT). And don’t forget Tesla (TSLA), which recently began a corporate Bitcoin purchase strategy.

According to the Bitcoin Treasuries website the top corporate owners of Bitcoin are as follows, with the latest number of Bitcoin they own.

IPOs

Confidence in the crypto market has underpinned a buoyant IPO market. Shares of Circle Internet Group, the stablecoin issuer, soared to $204.70 from a June 5 listing price of $31 as investors piled into the space. Meanwhile crypto investment firm Galaxy Digital listed on the Nasdaq in May after moving its Toronto listing to the US.

Grayscale Investments could be another one to watch – the crypto-focused asset manager said on Monday it had filed for an IPO. The Grayscale Bitcoin Trust ETF was among the first spot Bitcoin ETFs on the scene - it has more than $33 billion in assets under management across - more than 35 investment products.

ETFs

In addition to individual stocks, there are some ETFs that invest in a diverse portfolio of crypto-adjacent companies.

For instance, the Wisdomtree Blockchain Acc UCITS ETF is one to consider for a diversified crypto exposure. Its top holdings include Metaplanet, a Japanese corporate buyer of Bitcoin, crypto exchange Coinbase and broker RobinHood, which derives significant trading fees from crypto.

Key Takeaways

• Growing institutional demand for cryptocurrency and more favourable regulation in the US may support prices

• However, cryptocurrencies remain relatively new and untested, highly speculative and volatile

• There have been several high-profile failures of crypto-adjacent companies

• The FCA plans to lift its ban on crypto exchange traded products but says its ban on retail access to crypto asset derivatives (eg CFDs on Bitcoin) will remain in place