Thinking About Crypto?

As a Certified Financial Planner® professional, I’ll admit—I was very skeptical of cryptocurrency as a legitimate investable asset. And who can blame me? When I first wrote this blog a few weeks ago, Bitcoin – the biggest player in the space – was nearing $110,000. Now, as I hit publish, its down nearly 30%, proving that gravity applies to digital assets too.

Turns out, skepticism hasn’t stopped cryptocurrency from making its mark. Like many in the financial world, I questioned its staying power and practical applications. But over the past 15 years, crypto, particularly Bitcoin, has proven it’s more than just a passing trend. Since its launch in 2009, Bitcoin has reached new all-time highs and currently accounts for over half of cryptocurrency’s total market value.

So, let’s take a few minutes to cover some of the basics of crypto.

Cryptocurrency is a form of digital money that operates on a decentralized network. Unlike traditional currencies issued by governments, cryptocurrencies are powered by blockchain technology—a secure digital ledger that records transactions transparently and permanently. Bitcoin is the most well-known cryptocurrency, but it’s far from the only one. Others including Ethereum, Tether, and Dogecoin have gained traction over the years.

Some cryptocurrencies, such as Tether, are designed to maintain a stable value (typically pegged to $1), while others can be highly volatile. Many see cryptocurrency as a digital alternative to traditional money, but its price swings and evolving regulations make it feel more like an investment.

2. Why Is Crypto Gaining Popularity? 

One of the biggest draws of cryptocurrency is its decentralized nature—there’s no central bank or government controlling it. This independence allows for greater privacy, security, and accessibility, making it an appealing option for people around the world. More businesses are now accepting crypto as a form of payment, and its use in financial transactions continues to expand.

Speculators are drawn to crypto because, well, it’s speculative! The lure of potentially large returns in a short period of time is enticing for many. However, with these opportunities come significant investment risks. The crypto market is notoriously volatile, with values influenced by everything from regulatory announcements to market speculation to investor sentiment. Additionally, the technology behind cryptocurrencies is constantly evolving, which can make it difficult for investors to keep up.

Traditional investors have also gotten into the act, with certain studies like the one by Harvard Business School test showing that on average, cryptocurrency investors often have higher household incomes and live in wealthier areas. Over the last couple of years, crypto exchange-traded funds (ETFs) have also made investing in crypto more accessible to traditional investors.

3.  Should You Invest in Cryptocurrency? 

As any good financial professional will tell you…it depends!  Crypto is exciting, but it’s also risky. Prices can swing wildly, and unlike stocks or bonds, crypto doesn’t have traditional valuation metrics to help determine its worth. Instead, it largely depends on investor sentiment—meaning it’s tough to predict where the market will go next.   For those considering an investment, it’s a good idea to approach crypto with caution.

Many financial experts suggest limiting your exposure in crypto (or any risky investment for that matter) to no more than 5-10% of your overall portfolio. It can be one way to diversify, but it’s important to understand what you’re investing in, have a solid financial plan, and realistic expectations.

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