Should You Invest in Cryptocurrency?

Experts hold mixed opinions about investing in cryptocurrency. Because crypto is a highly speculative investment, with the potential for intense price swings, some financial advisors don’t recommend people invest at all.

For example, Bitcoin nearly quadrupled in value over the course of 2020, closing out the year above $28,900. By April 2021, the price of BTC had more than doubled from where it started the year, but all those gains had been lost by July. Then BTC more than doubled again, hitting an intraday high above $68,990 on November 10, 2021—and then dropped to around $46,000 at the end of 2021. As you can see, cryptocurrencies can be very volatile.

That’s why Peter Palion, a certified financial planner CFP in East Norwich, N.Y., thinks it’s safer to stick to currency that’s backed by a government, like the U.S. dollar.

“If you have the U.S. dollar in your cash reserves, you know you can pay your mortgage, you can pay your electricity bill,” Palion says. “When you look at the last 12 months, Bitcoin looks basically like my last EKG, and the U.S. dollar index is more or less a flat line. Something that drops by 50% is not suitable for anything but speculation.”

That said, for clients who are specifically interested in cryptocurrency, CFP Ian Harvey helps them put some money into it. “The weight in a client’s portfolio should be large enough to feel meaningful while not derailing their long-term plan should the investment go to zero,” says Harvey.

As for how much to invest, Harvey talks to investors about what percentage of their portfolio they’re willing to lose if the investment goes south. “It could be 1% to 5%, it could be 10%,” he says. “It depends on how much they have now, and what’s really at stake for them, from a loss perspective.”