Should I Be Investing in Crypto? What You Need to Know about Smart Investing

Cryptocurrency is no longer just a buzzword in the investment world; it’s been more than 16 years since the release of the first cryptocurrency, Bitcoin, in 2009. In recent months, some of the largest economic entities in the world, have indicated their desire and plans to buy enormous amounts of Bitcoin, at a time when there is very little Bitcoin left. For example, on 3/6/25 President Trump issued an executive order to create and fund a “Strategic Bitcoin Reserve” for the country, akin to the nation’s “Strategic Petroleum Reserve” or other reserves of nickel, or corn, etc.. Also, as of midsummer of 2025, there are 28 US states that have announced plans to build their own position of Bitcoin for their state pensions or reserves. In the fourth quarter of 2024, the sovereign wealth fund of Abu Dhabi bought over $400 million of Bitcoin, and other foreign countries have also announced their interest.  Despite these huge “votes of confidence” many people are still hesitant about investing in crypto because they don’t fully understand the advantages and drawbacks—and that’s wise! It’s good to be cautious when confronted with any “new to you” investment and to ask questions and seek out more information.

So, should you invest in crypto? We’ll help you understand both the risks and rewards, offering tips on how to navigate the crypto market for smart, informed investment decisions.

What Is Cryptocurrency?

Cryptocurrency is a type of digital or virtual currency, like Venmo and Zelle,   that uses cryptography for security. The most well-known example is Bitcoin, but there are thousands of other cryptocurrencies. They operate on decentralized networks based on blockchain technology, which is essentially a secure, digital ledger that records all transactions and is resistant to tampering.

At its core, cryptocurrency offers an alternative to traditional banking and financial systems, with its value often driven by the interplay of supply and demand. Although cryptocurrency is gaining popularity, it’s important to understand both the risks and benefits before deciding to dive in.

The Risks of Investing in Cryptocurrency

Before investing in crypto, it’s essential to consider the risks involved.

Volatility: Cryptocurrencies are known for their extreme price fluctuations. A single day can see a digital coin’s value rise or fall by hundreds or even thousands of dollars. This volatility presents enormous opportunities for profit, but it also carries the potential for significant losses. Unlike traditional investments, where steady returns are often more common, the crypto market can be unpredictable, and you may find yourself facing drastic price swings.

Regulatory Uncertainty: Cryptocurrencies are still a relatively new phenomenon, and the regulatory environment is constantly evolving. Governments around the world are grappling with how to regulate digital currencies, which could lead to sudden market fluctuations or even legal restrictions. The risk of a regulatory crackdown could significantly impact the value and future use of cryptocurrencies.

Security Concerns: Since cryptocurrencies are entirely digital, they are vulnerable to hacking and fraud. Many investors store their digital assets in online wallets, which can be vulnerable to cyberattacks. Additionally, once a transaction is made, it’s irreversible. This creates the possibility of losing significant amounts of money due to security breaches or mistakes, such as sending funds to the wrong address.

The Potential Benefits of Crypto Investment

Despite these risks, cryptocurrencies offer potential rewards that make them an attractive investment option for some.

High Return Potential: Many early crypto investors have seen substantial returns on their investments, particularly those who purchased the coins when they were worth only a fraction of their current value. For example, Bitcoin’s meteoric rise in value over the past decade has made many investors a fortune. Again, however, it’s important to remember that this high return potential also comes with the risk of substantial losses if the market turns against you.

Diversification: For some people seeking to diversify their investment portfolios, cryptocurrency can be a compelling option. Since digital currencies are not directly tied to traditional financial markets, they can provide a hedge against stock market downturns or inflation. Including crypto in your portfolio alongside other types of investments can potentially reduce your overall risk, especially if you are seeking assets that are not correlated with the performance of traditional investments.

Innovation and Future Growth: Cryptocurrencies represent the cutting edge of financial innovation. The technology behind blockchain has the potential to revolutionize industries ranging from finance to healthcare. As the crypto market matures, it could open up new growth opportunities, and early adopters might benefit from this technological evolution.

Smart Investing Practices in Crypto

If you’ve decided that crypto investing is right for you, following these smart investing practices can help mitigate some of the risks.

Start Small: Because of its volatility, it’s wise to start small. Never invest more than you can afford to lose. Beginning with a modest amount allows you to get comfortable with the market’s fluctuations without risking your financial stability.

Do Your Research: Don’t just follow trends or rely on speculation. Before investing in a cryptocurrency, research the project behind it. Understand the technology, the team, and the market demand. Knowledge is key to making informed decisions and avoiding scams.

Diversify Within Crypto: Just as with traditional investments, diversification within the crypto market can help manage risk. Consider spreading your investments across different cryptocurrencies rather than putting all your funds into a single coin. This can help protect you if one currency experiences a sharp decline.

Use Trusted Platforms: Only use reputable and secure platforms to buy, sell, and store your crypto. Look for exchanges with a solid reputation for security, such as Coinbase, Binance, or Fidelity. Ensure your assets are stored in secure wallets, preferably hardware wallets, which are kept offline and offer better protection against hacking attempts.

How Does Crypto Fit Into Your Overall Investment Strategy?

Crypto can be a valuable addition to an investment strategy, but it’s not for everyone.

Assessing Your Risk Tolerance: Crypto is a high-risk investment, and it’s important to assess your own risk tolerance before diving in. If you’re uncomfortable with the idea of potentially losing a large portion of your investment, then crypto might not be the best fit for you. Understanding your own financial situation and goals is crucial to making the right choice.

Incorporating Crypto into a Balanced Portfolio: If you’re planning to invest in crypto, it should complement, not replace, your existing investments. A well-balanced portfolio with a mix of assets like stocks, bonds, real estate, and crypto can help mitigate risk and ensure long-term growth. It’s best to view crypto as a small portion of a diversified investment strategy.

Long-Term vs. Short-Term Strategy: Some investors treat crypto as a long-term hold, believing in the future growth potential of digital currencies. Others prefer to trade crypto in the short term, taking advantage of price fluctuations to make quick profits. Decide which strategy aligns with your financial goals and risk tolerance.

Should You Invest in Crypto Now?

The current state of the crypto market is influenced by a variety of factors. In 2025, the market is still experiencing significant volatility, but it’s also seeing major institutional adoption and innovation. However, it’s important to stay informed about market conditions and external factors, such as regulatory changes or global economic events, that could impact crypto’s value.

Investing in crypto now can offer potential rewards, but it’s important to carefully evaluate whether this fits within your overall financial strategy and goals. A financial advisor can help you make the best decision.