The sane person's guide to investing in cryptocurrency

Despite Bitcoin's repeated and spectacular crashes, its floor keeps rising. Each recent deflation of a bubble has reset that floor a little higher.

Despite Bitcoin’s repeated and spectacular crashes, its floor keeps rising. Each recent deflation of a bubble has reset that floor a little higher. Most recently, recession fears have undercut Trump-fueled exuberance and driven Bitcoin down from its six-figure highs—but as of mid-March, it was still well above $80,000.

So how should the casual investor navigate all this? Is there a rational way to get exposure to the upside without losing one’s shirt to the inescapable volatility?

“I get this question all the time,” says David Pakman, a partner at the venture capital firm CoinFund. “What I would suggest is a blue-chip strategy.”

Pakman, who did long stints at Apple and VC firm Venrock, goes on to explain blue chips in the crypto context: “What I would tell people is to create a portfolio of 60% Bitcoin, 10% or 15% Ethereum, and then put the rest in four or five other blue chips like Solana, Uniswap, Aave, or Compound.”

To understand how a crypto asset might count as a blue chip, it’s helpful to understand that every blockchain—like every company—comes with a narrative that explains why it is valuable and will likely remain so.

In the case of Bitcoin, the narrative is intuitive and easy to explain. The original cryptocurrency is a store of value for long-term investors—“HODLers” in crypto parlance—who are confident that the worth of Bitcoin, whose supply is capped at 21 million coins, won’t be affected by spendthrift governments or money-printing central banks. That’s similar to the role gold plays in some portfolios. Bitcoin’s status as “digital gold” has only grown as more companies and even nation-states have added it to their balance sheets. The U.S. became the latest of these when President Trump announced the creation of a strategic Bitcoin reserve.

As for Ethereum, in narrative terms, it’s a versatile, globally accessible computer that lets users carry out a wide range of tasks such as supply-chain tracking and title registration using so-called smart contracts. Solana is billed as a newer, faster Ethereum. Uniswap and Aave, meanwhile, are leaders in decentralized finance, or DeFi, which describes a sophisticated technology for autonomous trading. In other words, these currencies are linked to blockchains that power value-generating, legitimate business activities, and the more broadly useful they become, the more their value should increase.

866%

Narratives, of course, should hardly be the only criteria for investing—as burned shareholders in fraudulent enterprises like Theranos or Enron will be quick to tell you. Even the most vapid of blockchain projects has legions of self-interested boosters who use social media, podcasts, and YouTube to cheer on worthless coins.

Before buying, it’s best to spend time reading about why a given cryptocurrency was invented and whether it is achieving what it set out to do. It’s especially useful to consider how much of a coin’s supply is controlled by insiders—often, consultants or marketers who helped launch the coin—who might cash in and dump it on the market if the price rises; and, on the positive side, to see if a blockchain has an active community of developers who are adding technical contributions.

There is another tactic buyers can take from the book of traditional investing, one that reduces exposure to price volatility: Purchase several small sums over a period of time, and be prepared to hold over a long horizon. In Pakman’s words: “Dollar-cost average for three months, then don’t touch it for five years.”

Finally, casual investors will find it much easier to purchase cryptocurrency now that large asset managers like BlackRock offer shares of Bitcoin and Ethereum in the form of exchange-traded funds available on conventional brokerage platforms.

Buying crypto in the form of an ETF comes with an annual management fee, albeit a modest one, that investors won’t encounter if they purchase crypto directly through a platform like Coinbase or Robinhood. The bottom line is that adding some crypto to one’s portfolio still isn't for the faint of heart—but it doesn’t have to feel reckless.

This article appears in the April/May 2025 issue of Fortune with the headline "The sane person's guide to investing in cryptocurrency."

Memecoins: A cultural force, and a terrible investment

When Coinbase CEO Brian Armstrong posted a picture from his wedding in October, crypto users rushed to mark the occasion—by creating rival cryptocurrencies dedicated to a fluffy white dog that appeared in the pic with the bride and groom. One faction, declaring the pooch’s name was Russell, launched a token of that name, flooding social media with memes of the Akita Inu. No, no, insisted another faction: The dog’s name was Hashbrown, they said, posting a stream of similar memes.