3 reasons investors consider cryptocurrency

Imagine it’s a regular weeknight and you’re scrolling through the news. You see a headline about Bitcoin hitting a milestone, and a separate story about a new crypto product becoming easier to access. Maybe a coworker mentions they own a small amount, and you catch yourself thinking: Would it make sense add crypto to my portfolio, too?

That curiosity is a common starting point. Cryptocurrency is still very new compared to stocks, bonds and other asset classes, but it has become more visible as its market infrastructure matures. Here are a few reasons an investor might consider crypto and how it can fit in a portfolio.

One reason some investors are drawn to cryptocurrencies like Bitcoin—the largest by market capitalization—is the idea that it could function like “digital gold,” meaning a store of value that, in theory, may preserve its purchasing power over time. This view often becomes more appealing when investors are concerned about inflation or the “debasement” (loss of exchange value) of traditional government currencies like the U.S. dollar.

The comparison to gold is largely about scarcity. Gold supply tends to grow slowly, while Bitcoin’s supply is limited by software rules.

That said, Bitcoin and gold are different. Gold is a physical commodity with a long history and does not depend on software to exist. Bitcoin is digital and can be transferred electronically, but its price has historically been much more volatile, and it relies on technology, computer networks, and market infrastructure to function.

Others are attracted to cryptocurrency because of its growth potential as a disruptive new technology, in much the way that a highly successful e-commerce site might upend traditional retail or a food-delivery app could disrupt the restaurant industry. From this perspective, Bitcoin is disrupting money itself, while smart-contact platforms like Ethereum are reshaping how financial services software apps are built and distributed.

Investors with this view focus on crypto as a growth-oriented investment whose value should rise as the technology becomes more widely used. That framing can be a practical way to think about crypto without trying to predict short-term price moves. For example, instead of asking, “What will crypto do next week?” the question becomes, “Do I expect adoption and use cases of crypto to expand over the next several years?”

Still other investors view cryptocurrencies like Bitcoin as a portfolio diversifier. The idea is not that Bitcoin is stable, rather that a small position in such a volatile asset can “smooth the ride” in an overall portfolio by not consistently moving in sync with other assets like stocks and bonds. This quality may help reduce overall portfolio risk if the portfolio is periodically rebalanced back to its target weights¹ and the asset maintains its low correlation with other investments in the portfolio.

However, Morgan Stanley’s Global Investment Committee finds that major cryptocurrencies have increasingly tended to move in tandem with other risky asset like equities, suggesting they do not always provide the diversification investors might seek. Additionally, while the volatility of major cryptocurrencies has gradually eased over time amid increasing institutional and retail adoption, it still remains exceptionally high.

Crypto is a newer, rapidly evolving asset that can be especially sensitive to shifts in investor sentiment, liquidity, and the broader policy backdrop. Prices can move sharply in both directions, and volatility has historically been much higher than in stocks and bonds.

Additionally, as a decentralized digital currency, crypto can be exposed to technology and operational risks. For example, encryption weaknesses and software bugs can impact the blockchain and digital wallets, which can lead to lost or inaccessible assets and network disruptions. Targeted scams, such as phishing, impersonation, fraudulent investment schemes, or malware, can lead to investors losing access to or control of their digital assets.

Another concern is potential limits on how many transactions a blockchain network can handle at once, which can contribute to slower processing and higher transaction fees. Because investing in cryptocurrency does come with significant risks, it’s important to start with education to gain an understanding of its history, return potential and volatility before you consider an allocation to it.

Building a foundational understanding of what cryptocurrency is and why it attracts interest can help you navigate the buzz with greater clarity. You may hear a range of motivations for investing, from views on long-term adoption and innovation, to perceptions of scarcity or diversification.

Stepping back to consider how (or whether) crypto aligns with your overall financial objectives, and what the trade-offs are, can help you determine if it has a place in your portfolio.

Article Footnotes

¹ Morgan Stanley Wealth Management Global Investment Office, AlphaCurrents Crypto: Are You Underweight in Bitcoin?, by Denny Galindo, James Ferraioli, and Jane Yu Sullivan, published Feb. 20, 2025.

CRC# 5247289 02/2026