The traditional way to invest in Bitcoin (BTC -0.82%) is to buy it directly, either through a crypto exchange or a stockbroker that offers it. An increasingly popular alternative is to invest in companies that hold Bitcoin, such as Bitcoin mining companies or Bitcoin treasury companies. Strategy (MSTR -1.36%), MARA Holdings (MARA -0.40%) and Cipher Mining (CIFR -0.07%) are a few examples.

Some of these companies even end up outperforming Bitcoin. As of September 22, Strategy has gained 1,650% over the last three years, compared to Bitcoin’s 522% return. However, there’s also a serious risk to these types of businesses.

Companies that have a large amount of Bitcoin on their balance sheets are reliant on its price increasing, or at least holding steady. If Bitcoin crashes, which it tends to do every few years, it could bring those companies down with it.

Strategy, the original Bitcoin treasury company, currently holds 639,835 BTC, worth about $72 billion today. Its market cap is $98 billion, meaning Bitcoin makes up nearly three-quarters of its value. MARA Holdings, a Bitcoin mining company, is an even more extreme case. It holds 52,477 BTC, worth about $6 billion, and has a market cap of $7 billion.

Cipher Mining is an example of a company that manages its holdings differently. While Strategy and MARA Holdings have focused on accumulating Bitcoin, Cipher Mining also sells Bitcoin regularly. It holds 1,414 BTC, worth about $159 million, and has a $5 billion market cap.

Image source: Getty Images.

This doesn’t necessarily mean Cipher Mining is the best of the bunch. But it takes a different approach that makes it less volatile than companies with Bitcoin-heavy balance sheets. Therefore, you may want to consider Cipher Mining if you’re looking for crypto stocks that aren’t simply Bitcoin treasury companies.