Crypto is buzzing like crazy, especially now that Trump won the election. The Securities and Exchange Commission (SEC) approved the first spot bitcoin exchange-traded funds (ETFs) early last year. And July 2024, regulators approved the first U.S. spot-ether ETFs, the second-largest cryptocurrency in the world, something that’s given investors greater exposure to this new asset class within a more regulated framework than before.
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Despite its growing popularity with mainstream investors, some financial advisors are still cautious. GOBankingRates spoke with two such individuals about their thoughts on investing in crypto and why it might be best to remain cautious about putting a large chunk of cash into the asset. Here’s what they said.
It’s no secret that cryptocurrency is a volatile asset class, but even where you invest can make a huge difference in how secure that investment ends up being.
“When it comes to cryptocurrency, it’s important to emphasize that you should only invest what you’re willing to set aside and not touch for at least five years,” said Hossein Azari, crypto expert and Founder at OpenFi. “Cryptocurrency markets often follow four-year cycles, so patience and the ability to ride out market fluctuations are key.”
As for security, not all exchanges are created equal. Those who wish to invest may want to buy and hold crypto in either a U.S.-regulated exchange or a trusted non-custodial wallet. According to Azari, both options have their benefits.
“Non-custodial wallets give you complete control of your assets, while regulated exchanges provide added layers of oversight and consumer protection,” he said. “Choose based on your comfort level and technical expertise.”
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Regulations provide extra security for investors, especially in the face of rising crypto scams. They also highlight current tax rules. But regulations are ever-changing and as far as crypto goes, they’re still relatively new.
“As someone who has worked with clients across diverse portfolios, I understand why crypto is such a tempting investment — especially with its recent momentum following Trump’s election win,” said Antwyne DeLonde, CEO at VisionX and a retired financial advisor. “However, there are important reasons for caution when considering crypto as part of your financial plan.”
One of the reasons DeLonde said he’s cautious about investing in crypto is the possibility of regulatory shifts coming in 2025. Shifts like these could lead to greater uncertainty that could impact the crypto market.
Unlike traditional asset classes like real estate or gold, crypto isn’t tangible. It’s not something investors can hold and put a value on in the same way.
“Many cryptocurrencies are speculative, without intrinsic value or clear use cases,” said DeLonde. “Unlike stocks or real estate, you’re often investing in the idea of potential growth rather than something backed by earnings or assets.”
This alone could be reason enough to hold off on investing in crypto, at least for the time being. A lack of understanding of this asset class is another.
Just because some experts are wary about investing in crypto doesn’t mean it’s inherently a bad way to diversify an investment portfolio. For those who do want to invest, it’s simply best to proceed with caution.
“When it comes to Bitcoin or any other cryptocurrency, uncertainty is an inherent part of the asset class,” said Azari. “This uncertainty drives both sharp rises and steep crashes. If you’re joining this space for the potential gains, you must also be prepared for significant downturns. Thoughtful, deliberate decision-making is critical in such a volatile market.”
While you’re at it, only invest if you’re in it for the long haul. Like stocks, short-term investing tends to pan out much less often with crypto than long-term investing.
“Avoid chasing short-term trends,” said Azari. “Before making any investment decisions, take a step back — wait a day or two, revisit your plan, and ensure it aligns with your long-term strategy. The key to navigating crypto successfully is to remain focused on the bigger picture and invest with caution.”
DeLonde had a few other suggestions:
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Treat crypto as a high-risk addition to your portfolio
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Keep crypto to 5% or less of your total investments
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Choose cryptocurrencies with a proven track record
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Do your research to make sure you know what you’re getting into and the potential risks
“Crypto’s buzz is exciting, but it’s essential to approach it with a clear head and a well-thought-out plan,” DeLonde said. “It’s not for everyone, and it’s certainly not a ‘get rich quick’ solution. For those who are interested, the key is to balance the potential for high rewards with a healthy respect for the risks. Always prioritize your broader financial goals and ensure crypto aligns with them, rather than dominating them.”
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This article originally appeared on GOBankingRates.com: I’m a Financial Advisor: 3 Reasons I’m Cautious About Crypto in 2025
