The world of cryptocurrencies (crypto) and other digital assets keeps changing. Recent news, along with the rising price of cryptocurrencies like Bitcoin, has made people interested again. New technologies in crypto are, without doubt, exciting.
But despite all the talk, our advice is the same: most investors don’t need to change their investments to get into this risky and speculative area.
Crypto used to be all about decentralisation, but now it’s very involved in politics. As The Economist recently said, the industry has become like “the ultimate swamp asset” – attracting lots of lobbying, ways to get around rules, and self-serving deals1.
When spot Bitcoin ETFs were approved in the US in early 2024, many saw it as a big step. But this doesn’t change much for investors who plan for the long term. Crypto is still volatile, has no real inherent worth, and is speculative. Laws might become more friendly to crypto later, but that alone won’t change the underlying characteristics of Bitcoin and other cryptocurrencies .
We don’t ignore crypto. We consider it when we regularly and thoroughly review investment portfolios, just like many other investment opportunities. In this short note, we look at three points for investors with diverse investments who might think about adding crypto. Our recommended investment solution comes from our Investment Committee’s focus on managing risk.
- The role of crypto in an investor’s portfolio is unclear
Each part of an investor’s portfolio should have a clear purpose. Stocks aim for growth, whilst Bonds are for safety. Crypto’s role is not clear.
Some cryptocurrencies, like Bitcoin, have seen huge price increases since they started. Bitcoin has the longest history, but it’s still a relatively short track record. Cryptocurrencies have no real value of their own. They don’t generate money like stocks and bonds. Recently, much of crypto’s price rise might be due to guesses about new, more supportive laws. Without strict rules, some think Bitcoin’s price will keep rising because it’s seen as a store of value.
The price of Bitcoin2 (BTC) changes a lot. This shows it’s not suitable as a store of value, as seen in the chart below, which shows its monthly returns over the last five years. Look at the wide range in the chart: Bitcoin’s price swings make the stock market seem stable, but it’s not!
Figure 1: Range of monthly returns of Bitcoin price versus stocks over the last five years
Source: Albion Strategic Consulting. Albion World Stock Market Index (https://smartersuccess.net/indices). Jul-20 to Jun-25. Returns in USD*. BTC monthly returns downloaded from coincodex.com
It’s hard to understand the economic rationale for how crypto generates returns. This makes its role in a portfolio unclear, even if good products existed to invest in it now.
2. Putting the track record of crypto into context
Some who support crypto might say its history is now long enough to make it a valid investment for portfolios. The first Bitcoin was created in 2009. Many other cryptocurrencies are much newer. It took a while for Bitcoin or crypto to become widely known. Bitcoin was added to the Oxford English Dictionary in late 20143. This is nothing compared to the more than 100 years of stock and bond returns from many regions.
It’s true that people who mined or bought Bitcoin early on saw amazing returns, even 100% per year between August 2011 and May 20254. But this is a common trap for investors: looking only at past performance. Investing in NVIDIA with 1.5 times leverage would have given similar returns as Bitcoin over this time5. But that doesn’t mean either is a smart investment for the future, for reasons that might seem clear. Building an investment portfolio only on past results can quickly expose you to unexpected and unwanted risks.
New technologies like blockchain-based tokenisation might be explored, developed, and used. If you invest in a varied mix of stocks and bonds, you can benefit from new digital asset technologies as companies adopt them. If companies make money from crypto (either by selling related goods or services, or by holding crypto themselves), then investors benefit through dividends or rising share prices. Examples include MicroStrategy (600,000 BTC)6, MARA Holdings Inc. (50,000 BTC)7, and Riot Platforms Inc. (20,000 BTC)8.
The digital assets industry is big and important to the world economy, so we can’t ignore it. Smart investors put money into diversified, low-cost funds that follow a plan. This puts them in a good position. Their investments are varied enough not to be too affected by crypto market changes, but they still benefit from the new ideas and progress that blockchain technology and cryptocurrencies might offer.
3. Complexity and perceived sophistication do not make something a good investment
A new product isn’t always revolutionary. The digital assets world has many technical solutions with exciting futures. But without knowing the future, it’s impossible to tell which technologies will become commonplace.
“Investors read confusing articles full of complex words and think smarter people are investing, so they should too.”9
Any investor should try to understand the risks of their investments. Cryptos are very complex. Few people truly understand what they are and the risks of owning them. Managing direct crypto investments would take a lot of time and effort, be complex, and might not be enough. A good rule of thumb is to avoid investing in anything whose risks you don’t fully understand and can’t explain.
Our portfolios are based on evidence and not hype. They take on risks that are well understood. The portfolios are spread globally, low-cost, and aims to capture long-term market gains. Our Investment Committee constantly reviews all investment options. If crypto ever becomes a common investment with a clear role, it might deserve its own place in portfolios. We’re a long way from that now. For now, we’re comfortable with our stance: no changes needed in relation to crypto.
General Investment Risk Warnings
Please remember the value of your investments and any income from them can go down as well as up and you may get back less than the amount you originally invested. All investments carry an element of risk which may differ significantly.
If you are unsure as to the suitability of any particular investment or product, you should seek professional financial advice. Tax rules may change in the future and taxation will depend on your personal circumstances. Charges may be subject to change in the future.
Past performance is not indicative of future results and no representation is made that the stated results will be replicated. Portfolio performance data are for illustrative, educational purposes only and do not represent live client portfolios.