The sane person’s guide to crypto investing

There have always been plenty of reasons for prudent investors to steer clear of the crypto markets. Most obviously, there are the rampant, ongoing, and widely publicized scams. These contribute to bouts of wild volatility that have led the entire market to plummet more than 80% on numerous occasions. There is also crypto’s precarious legal status: The latest big rally, which saw Bitcoin hit $109,000 in January, fueled by President Trump’s promises of lighter regulation, underscores how an asset designed to exist outside government remains, ironically, highly subject to political whims.

But against all this, would-be investors must weigh an equally compelling factor: Bitcoin, the biggest digital currency, is one of the very best-performing assets of the past decade, easily eclipsing gold and the S&P. Its price has climbed from $325 in January 2015 to its peak early this year—a roughly 300-fold increase. (One way to silence someone who’s boasting about their Nvidia stock? Tell them you bought Bitcoin 10 years ago.)

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 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.

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 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.

If this sounds ridiculous, it is. But it’s also serious money. During the brief course of the Hashbrown vs. Russell debate, speculators bid the value of the pair of coins to well over $10 million. It’s just one example of the memecoin phenomenon, one of the defining features of the most recent crypto bull market.

The idea for these coins, which are typically launched in response to a fleeting pop-culture moment and sustained by social media hype, is hardly new: The original memecoin, Dogecoin, debuted in 2014. But in the past two years, platforms like Pump.fun have made it easy to spin up and distribute new cryptocurrencies in minutes.

Unlike crypto’s small family of “blue chips,” memecoins have no utility or future cash flow, which makes them terrible investments. But that hasn’t stopped gamblers from propelling some coins to stratospheric values. As of mid-March, relative newcomers like Bonk and Fartcoin had amassed respective market values north of $800 million and $200 million, while Dogecoin was worth over $25 billion.

Memecoins are highly volatile, even by crypto standards. Notably, President Trump’s memecoin notched a $15 billion market cap after launching in January, before tumbling to $2 billion in March. Meanwhile the Melania coin, honoring the first lady, slipped from over $2 billion at launch to closer to $300 million today, in part due to “sniping”—a term that describes insiders acquiring much of a coin’s supply early on at launch, then dumping it on unsuspecting retail investors as its value peaks. As for the Armstrong dog coins, Russell (the pooch’s correct name) is still worth more than $1 million, while Hashbrown shared the fate of most memecoins: It’s now worth nothing at all.

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

This story was originally featured on Fortune.com