The original cryptocurrency is priced well above $100,000, marking a gain of 160% over the past 12 months. Crypto enthusiasts are crowing that 2025 is a breakout year for digital currencies—thanks largely to President Donald Trump’s vociferous support.
There’s no denying that crypto has become one of the most fascinating corners of finance, especially as the asset’s global market capitalization is now over $3 trillion. According to Scott Shapiro, senior product director at Coinbase, everyday investors shouldn’t ignore the impressive growth of crypto. If they do, he says, they might regret it.
“At some point, you’re left on the sidelines if you don’t become someone who has any crypto because the financial world is modernizing and becoming more open, and crypto is the way that that’s happening,” Shapiro tells Fortune.
Despite the hype, crypto markets remain lightly regulated and subject to extreme price volatility, leaving most Americans unwilling to hazard an investment. It’s one of the riskiest investment asset classes, warns Ariel Zetlin-Jones, professor of economics at Carnegie Mellon University’s Tepper School of Business. But even he admits it’s not a bad idea for investors to add some crypto to their portfolio—if the risks are understood.
Bitcoin has soared 50% since November, and other popular coins have seen even stronger gains over recent months. If the red-hot crypto market is giving you a case of FOMO, that’s understandable. But consider the risks alongside the opportunities—here four tips outlining how you can safely and responsibly invest in cryptocurrency.
Crypto remains a young and dynamic market that is still developing, and that means the best investing strategies are not cut and dry.
An investors’ journey always begins with in-depth research, but that’s especially true when it comes to cryptocurrency. Your decisions should always be based on facts, not whims. This includes learning as much as possible about coins, exchanges, and wallets.
Crypto is one of the most widely discussed topics on platforms like Reddit, but wise investors should discount the advice offered by anonymous strangers on social media platforms. They do not have your best interests at heart. The same goes for research materials offered by crypto exchanges and platforms.
If a crypto coin looks too good to be true, it probably is. Beyond the largest cryptos by market cap—Bitcoin, Ethereum, and XRP—the market is plagued with memecoins, including Trump’s own. Their extreme price volatility is not your friend, and many are vehicles for fraud.
Zetlin-Jones warns that most memecoins are similar to nonfungible tokens (NFTs)—which were popular several years ago. While they may catch your attention, for most people they are not a good financial move.
“We have a lot of evidence now that a majority of people who invested in and bought NFTs ended up losing money,” says Zetlin-Jones. “That’s not to say no one made money, and that’s not to say there aren’t still some valuable non-fungible tokens today, but it is to say a majority of people who invested lost money. I think memecoins are quite similar.”
Check out Fortune’s Crypto Crash Course to learn everything you need to know about blockchain and cryptocurrencies.
Markets are volatile by nature—but it’s critical to recognize that crypto prices are especially volatile. It can be easy to look at Bitcoin and see that it has quintupled in value over the last two years. Not many people will complain about returns like that. However, if you look more closely, there are some red flags. For example, between July 29 and August 5, 2024, the price of Bitcoin dropped by 22%.
“If you look at daily returns over short periods of time, its volatility of its returns is an order of magnitude larger than other what economists or financial market players view as risky assets, like the S&P 500 on a daily basis,” warns Zetlin-Jones.
When buying any coins, be wary that the price could dramatically rise and fall at any time of the day. For some, that may sound fun, but for others, that could mean financial debilitation.
There are millions of cryptocurrencies available today, and owning a well diversified portfolio of crypto assets can help mitigate the dramatic volatility and make investments less risky over the long term.
Investors should only make crypto a minor part of their broader investment portfolio—after index funds, ETF, fixed income assets, and individual stocks. Traditional financial assets are far less risky than crypto.
“I think there’s growing consensus that a portion of your portfolio being invested in (cryptocurrencies) is not offering a bad idea,” says Zetlin-Jones. “But people should understand the risks they take when they expose part of their portfolio to these very risky assets.”
For those who want to learn by doing but want to avoid risk, stablecoins are one route. They are pegged to assets like gold or the U.S. dollar, and the strongest have avoided major volatility. Just note that being called a stablecoin is no guarantee of stability—the Terra / Luna stablecoin platform, for instance, was involved in a major crypto market meltdown in 2022.
Cryptocurrency has its perks—the market never closes, for example—and it can remove barriers like dealing with financial market intermediaries, international borders, and fees.
“As opposed to investing in an ownership of company shares through traditional stocks, investing in crypto provides investors opportunity to trade 24/7, support blockchain projects they are interested in, collect and trade digital assets and memorabilia like NFTs, and much more,” said a spokesperson from Crypto.com
Shapiro adds that the crypto market is a far more efficient way for markets to operate.
However, that comes with downsides. Besides volatility and potential scams, governments and financial institutions provide far fewer consumer protections for crypto users. If you feel like you are wronged in the crypto market, there may be little that anyone can do.
Don’t forget that any American who sells cryptocurrencies, receives it as payment, or has other digital transactions must report it as part of your annual tax filing.
Fewer than 1 in 5 Americans have experimented with crypto, according to Pew Research. President Trump has promised to bring the industry into the mainstream, and his administration is expected to create a crypto advisory council. Trump’s pick to lead the U.S. Securities and Exchange Commission (SEC) is a vocal crypto advocate.
“We welcome the supportive crypto stance of the new administration to advance innovation in digital assets. We expect to see clearer regulations and policies designed to accelerate the responsible adoption of crypto, which will fuel further growth in the global market and the industry as a whole,” said a spokesperson from Crypto.com
Depending on who you speak to in the financial industry, they may have radically different viewpoints on cryptocurrency. While some investors will not touch it with a 10-foot pole, others are already using it in their everyday lives to store, transfer, and invest money. Shapiro, for example, says he has used cryptocurrency to pay rent.
Zetlin-Jones says it ultimately remains to be seen how crypto will compete with the traditional banking network. “It’s still one of the most volatile asset classes in financial markets … but it’s a technology in search of a killer app,” he adds.
If you do join the millions of people who have dived into crypto, you need to recognize that it’s quite different from traditional financial markets. The risk of losing money in a short period is high. And while new technology is never perfect, cautious and informed investors have the potential to benefit.
