Is cryptocurrency a good investment?

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Summary

• Cryptocurrency (commonly referred to as crypto) is a type of digital asset that exists only electronically and operates on blockchain networks, which are decentralized ledgers that record transactions across distributed computers.

• Well-known crypto assets such as Bitcoin (BTC) and Ethereum (ETH) support different use cases, including peer-to-peer transfers, programmable smart contracts, decentralized finance (DeFi), and digital payments. Stablecoins are a category of crypto assets designed to maintain the value of a targeted fiat currency and are widely used for payments and trading.

• Crypto markets operate 24/7 and can experience significant price volatility. Prices may move based on supply and demand, market sentiment, technological developments, macroeconomic conditions, and regulatory changes.

• In the United States, federal agencies and lawmakers have increased oversight of digital assets. Legislation such as the GENIUS Act established clearer requirements for certain fiat-backed stablecoins, while other proposals aim to further define how digital assets are supervised.

• Like stocks, gold, and other investments, crypto assets involve risk. Price fluctuations, regulatory uncertainty, technology risks, fraud, and market misconduct can all affect outcomes. Whether cryptocurrency fits into a broader investment strategy depends on individual goals, time horizon, and risk tolerance.

“Is cryptocurrency a good investment?” is a very common question. You may see stories about high returns, hear warnings about scams and high risk, or even watch people argue about crypto on social media. It can feel exciting and confusing at the same time.

In this article, we’ll provide an overview of cryptocurrency, how it functions, and some of the risks and considerations associated with investing in it. The goal is to provide clear information so you can evaluate your options and be more aware of potential upsides and risks.

What is cryptocurrency?

Cryptocurrency (commonly also referred to as crypto, digital assets, or tokens) exists only in electronic form and does not have a physical version like paper cash or metal coins.

So how does cryptocurrency actually work? It relies on blockchain technology to record and verify transactions.

Blockchain technology is a way of recording data in blocks, sequential updates  that link together in order to update globally shared ledger. Many computers in the network share the same record, agree on which transactions are valid, and simultaneously update the shared ledger. 

This design makes it harder to make invalid changes to the record without detection. However, like any technology, blockchains  are not completely free from potential bugs, hacks, or human error.

There are many different types of cryptocurrencies, but a few of the most commonly known assets include:

• Bitcoin (BTC) is the first cryptocurrency and remains the most widely recognized by market capitalization. Like many digital assets, it has historically experienced significant price volatility, and its value can fluctuate based on market demand and broader economic factors. In 2024, the U.S. Securities and Exchange Commission approved spot bitcoin exchange-traded funds, allowing investors to gain exposure to bitcoin through regulated investment products and expanding its accessibility within traditional financial markets.

• Ethereum (ETH) is a blockchain network that supports smart contracts, which are programs that operate on the blockchain and automatically execute when predefined conditions in the code are met. These programs are used in decentralized finance (DeFi) and other applications.

• Solana (SOL) is a blockchain network designed to support smart contracts, decentralized applications, and operate at lower latency. SOL is the network’s native token, used to pay transaction fees and participate in network validation. The Solana blockchain was developed to increase transaction throughput compared to some earlier blockchains.

Cryptocurrencies belong to the broader world of digital assets. Digital assets include anything of value that exists mainly in digital form, such as tokens that represent access, rights, or even claims on real world items.

A small number of countries have recognized specific cryptocurrencies as legal tender, while others continue to evaluate their regulatory approach.

Legal tender is money that a government officially accepts for paying debts and taxes, such as the U.S. dollar in the United States.

How crypto compares to traditional money

You can think about cryptocurrency by comparing it to fiat currencies. Fiat currencies are government issued money like the U.S. dollar or the euro. A central bank, such as the Federal Reserve in the United States, manages a country’s fiat money system, sets key interest rates, and tries to support stable prices and employment.

Here’s a simple comparison:

• Fiat currencies like the U.S. dollar work inside a system of banks, payment networks, and financial institutions. You can use them widely in daily life, but you sometimes face slow transfers and banking hours.

• Crypto assets like Bitcoin and Ethereum move on decentralized networks. Decentralized means no single company or government controls the entire system. This structure can allow faster global transfers and fewer traditional intermediaries, but it can also mean that consumer protections may differ from those in traditional banking or brokerage systems.

Stablecoins, fiat-backed assets, are crypto assets designed to maintain a stable value, often by being backed by reserves linked to a fiat currency like the U.S. dollar or Euro. Because of their price stability, stablecoins are increasingly used for payments, trading, and moving funds between platforms. In the United States, recent legislation outlined in the GENIUS Act has accelerated adoption by numerous financial institutions and payments networks including the likes of Visa, Mastercard, and many more.

In the United States, regulators and lawmakers are actively working to clarify how digital assets should be supervised under the CLARITY Act. Agencies such as the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and banking regulators have increased oversight and issued guidance aimed at improving transparency and investor protection. Proposed and enacted legislation continues to shape how crypto platforms, exchanges, and stablecoin issuers operate.

Crypto offers new use cases, but like all investments and financial technologies, it brings tradeoffs that are still evolving within the U.S. regulatory framework.

How people use cryptocurrency today

People use cryptocurrency in several ways. Below are just a few examples: 

Some common use cases include:

• Holding Bitcoin or other crypto assets as a store of value or as part of an investment portfolio. Some people believe bitcoin’s limited supply and growing adoption could support its value over time, while others see it as a higher-risk investment. Like many investments, prices can rise or fall significantly which means holders of these assets can lose money.

• Using Ethereum and other smart contract platforms to interact with DeFi, which stands for decentralized finance. DeFi applications use code instead of traditional financial institutions to handle things like lending, borrowing, or trading. This can reduce reliance on middlemen, but it also introduces risks, including potential smart contract errors and market volatility or misconduct that can occur in any financial market.

• Sending payments across borders more quickly than some traditional methods. Crypto transfers can settle in minutes or even seconds, but hurdles still remain to enable users to quickly leverage crypto for everyday transactions. Companies like Rain are rapidly making in-roads at solving these problems with stablecoin backed debit cards.  

• Using stablecoins. Stablecoins are commonly used for payments, trading, and moving funds between platforms because they are often treated as a dollar equivalent that settles near-instantly, as opposed to days for bank transfers. For example, companies like Rain are rapidly making in-roads at making stablecoins a core part of everyday payments with stablecoin-backed debit cards..

In the United States, the GENIUS Act established clearer federal requirements for certain fiat-backed stablecoins, including reserve and oversight standards. This legislation aims to strengthen transparency and consumer protections. However, stablecoins still depend on the quality of their reserves, risk management practices, and operational safeguards.

These use cases show how flexible crypto can be, leveraging code over traditional intermediaries, but like any emerging technology, requires clear rules and oversight to protect every day users.

What “crypto investing” really means

When people talk about crypto investing or crypto trading, they usually mean buying crypto assets and holding or trading them on crypto exchanges or in a crypto wallet.

A crypto exchange is an online platform where you can buy, sell, or trade cryptocurrencies. Many options exist for users today, offering a wide range of markets, features, and fee structures.

A crypto wallet, often referred to as a self-custodial wallet,  is a tool that lets you store and manage your digital assets. Wallets rely on a private key, a secret series of letters and numbers that proves ownership of asset held at a certain blockchain address. If you lose your private key or share it with someone by mistake, you can lose access to your funds permanently. Innovations in recent years are improving the user experience to enable more friendly options for self-custody of assets. 

People participate in crypto markets in various ways including:

• Buying and holding for the long term.

• Trading short-term price moves.

• Using DeFi applications for trading, lending, and borrowing

Each strategy comes with its own tradeoffs and risks. For example, frequent trading can increase transaction fees and taxes. 

None of these activities can guarantee high returns. Like with any investment, investors should use good judgement and only commit money they can afford to lose.

Growth stories and high returns

Some buyers in Bitcoin, Ethereum, and other projects have seen large gains over time, and many media stories highlight those outcomes.

On the other side:

• Large gains in the past don’t guarantee anything in the future.

• Many assets experience high levels of volatility that interest opportunistic investors but can also result in unexpected sizable losses.

• Your emotional response to volatility swings links closely to your risk tolerance, which is how much risk and uncertainty you personally feel comfortable with.

Crypto can offer powerful tools and new ideas, but carries real downside risk like any investment. None of this makes crypto “bad.” It just means you should do your own research before investing in potentially higher risk assets.

Scams, hype, and market manipulation

Scams happen across all financial markets, but crypto’s rapidly evolving rules have historically attracted more bad actors that can make scams more common and harder to spot.

Common crypto-related scams include:

• “Rug pulls,” where a crypto project builds hype, raises money, and then disappears.

• Fake customer support messages that try to steal your private key or login credentials.

• Social media promotions that promise high returns or “guaranteed” profits.

Crypto markets can also face market manipulation, where large players or groups try to move prices for their own gain through activities like wash trading or pump-and-dump schemes. The Commodity Futures Trading Commission lists market manipulation and fraud as key risks in digital assets.

Regulation and regulatory uncertainty

One of the biggest topics in crypto is regulation. Unlike stocks and many bonds, which follow clear securities rules, crypto sits in a gray zone in many places, though recent developments have brought more clarity for investors.

Regulatory uncertainty means:

• Different countries treat crypto in different ways, from open experimentation to strict bans.

• Rules around whether a token is a security, a commodity, or something else have been subject to different interpretation over time.

• Tax rules, reporting rules, and compliance expectations are evolving and can create surprises.

For individual users, this regulatory uncertainty means:

• New rules could affect the way exchanges, wallets, and other services operate.

• You may need to track rules in your local area if you engage in crypto investing.

By contrast, traditional securities like stocks and many ETFs trade in a more established regulatory environment, although they still carry risk, can still involve fraud, and may introduce changes over time.

Crypto versus other assets like stocks and real estate

Many people think about cryptocurrency in the context of other asset types such as stocks, bonds, and commodities.

Here are a few comparisons.

Stocks and ETFs

Stocks represent ownership in companies, and ETFs are funds that hold baskets of assets and trade like a single stock. Many people reach these assets through a brokerage account at a bank or a fintech app.

• Stocks often connect to company fundamentals, such as earnings and revenue, but also trade on momentum and headlines.

• ETFs can give diversification by spreading exposure across many holdings while maintaining a low cost structure for investors.

• Stocks and ETFs still face market drops, company failures, and sector downturns.

• You still pay transaction fees, spreads, and fund expenses that can lower returns.

Gold

Gold is a physical commodity that has long been used as a store of value. Investors can gain exposure by buying physical gold, gold-backed funds, or shares of gold mining companies.

• Gold is sometimes included in diversified portfolios because of its long history in global markets. 

• However, its price can still fluctuate based on supply and demand, interest rates, and broader economic conditions. Gold also does not produce income like dividends or interest.

Crypto sits alongside assets like gold as another investment option. It offers new digital functionality but can also involve significant risk and price volatility.

Costs, fees, and hidden friction

When you think about any investment, including crypto, it helps to look closely at costs.

In crypto, transaction fees can include:

• Blockchain network fees that go to miners or validators.

• Trading fees charged by crypto exchanges.

• Spreads between buy and sell prices.

In traditional assets, costs may show up as:

• Trading commissions or spreads in a brokerage account.

• Fund expense ratios in ETFs or mutual funds.

• Taxes when you sell for a gain.

Investor.gov reminds investors that fees and expenses reduce returns over time. Even small percentage fees can matter a lot over many years. That is why many educators encourage people to look at both potential returns and total costs when they compare financial products.

Research, white papers, and fundamentals

If you explore any crypto project, you’ll often see a white paper. A white paper is a document that explains how the project works, what problem it tries to solve, and how its token fits into the design.

Reading a white paper can:

• Help you understand the project’s goals and claimed functionality.

• Show you how the team thinks about economics and token supply.

Investors and users alike should maintain a critical lens as many projects are “yet to be prove” technology;:

• White papers come from the project team itself, so they can highlight positives more than risks.

• They may use technical language that feels hard to follow.

Traditional asset analysis often looks at fundamentals, like revenue, profits, and cash flow. In crypto, fundamentals might include network usage, developer activity, security track record, in addition revenue and token ownership. Given a lack of consistent disclosure methodology, crypto projects may vary dramatically in the information that is available. However, unlike traditional financial services, blockchains provide public information records that anyone can access at any time. 

Crypto’s mix of technical and financial information means research can take time and effort, and even then, outcomes stay uncertain.

Your risk tolerance and personal context

You matter more than any asset. Your life situation, goals, and emotions all shape how any investment might feel.

Some people treat crypto as a high risk piece of their overall portfolio. Others decide that the volatility and uncertainty don’t match their risk tolerance. Neither choice is right or wrong.

When people think about how crypto fits into their bigger picture, they often reflect on:

• How they feel during large price movements.

• How steady their income and near term savings look.

• What their personal research and conviction is telling them.

A professional financial advisor may be able to help you think through these questions. 

So, is cryptocurrency a “good investment”?

You’ll notice that this article hasn’t answered that question with a simple yes or no. That’s on purpose.

Calling something a good investment or a safe investment can be misleading, because:

• Outcomes depend on future prices, which nobody can predict with certainty.

• Results depend on when you buy, when you sell, and how you react to volatility.

• Different people have different goals and different risk tolerance.

What you can say is that:

• Cryptocurrency is emerging as a significant asset class, reaching over $3 Trillion in total market cap, and  offers new digital tools and use cases.

• It carries meaningful risks, including volatility, evolving regulatory clarity, scams, market manipulation, technology failures, transaction fees, and the possibility of total loss, just like any other investable asset class.

• It doesn’t replace traditional assets like stocks or real estate. It simply adds another category of digital assets to be considered in the modern day portfolio.

Any decision about crypto investing forms part of a broader personal investment strategy. You might choose to learn more, talk with a trusted financial advisor, or focus on other asset types. All of those paths can be valid.

How OnePay can help you get started

If you’re interested in crypto, OnePay provides an easy way to buy, sell, and manage crypto alongside your other financial activity. Below are a few ways OnePay can support you as you get started on your crypto journey.

Buy, sell, and hold crypto in one app

OnePay lets you buy, sell, and hold supported digital assets directly in the app, without needing to use multiple platforms or accounts.

Manage crypto alongside your finances

Your crypto activity appears alongside your other OnePay financial services, allowing you to view and manage your financial activity in one place.

Start with small amounts over time

You can begin with as little as $1. Features like roundups automatically allocate small amounts from everyday transactions into crypto, which may help you build exposure gradually.