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| Meta Title | Is Bitcoin a Good Investment? - NerdWallet |
| Meta Description | Bitcoin might have seemed like a good investment based on its 2024 returns, but 2025 has shown how volatile its price can be. Make sure you understand the risks before investing. |
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| Boilerpipe Text | Bitcoin
, the largest cryptocurrency by market cap, has been on a journey. Bitcoin's price topped $100,000 for the first time on Dec. 4, 2024 — a long-awaited milestone spurred by the election of Donald Trump. In 2025, it has sometimes dipped below that mark, but has also hit new highs, such as surpassing $124,000 in August.
But deciding if Bitcoin has a place in your portfolio requires looking beyond today's headlines.
Does Bitcoin belong in your portfolio?
Bitcoin is a risky investment with obvious high volatility, and generally should be considered only if you have a high risk tolerance, are in a strong financial position already and can afford to lose some or all of your investment.
If you choose to invest, it’s important to maintain a diversified portfolio that includes several different types of investments to reduce your overall risk exposure. As a rule of thumb, don't invest more than 10% of your portfolio in risky assets like Bitcoin.
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Investing in Bitcoin
Bitcoin pros
Bitcoin historically has offered the potential for high returns.
It’s decentralized. That said, many people choose to trade and store Bitcoin on centralized platforms.
Bitcoin has the potential to be a non-correlated asset, similar to gold. This means it may not follow the trends of other assets, like stocks. However, while Bitcoin has had moments of non-correlation with the S&P 500 in the last decade, it has yet to prove itself as a truly non-correlated asset.
Bitcoin cons
The price of Bitcoin can go up, as referenced above. It can also go down — a lot. Unlike traditional financial exchanges, crypto exchanges don't have circuit breakers, which automatically pause trading when prices dive too quickly. Crypto markets also trade 24/7, and dramatic dips can happen at any time.
Transactions are irreversible. People have lost millions of dollars of Bitcoin because they lost or forgot their wallet credentials.
Crypto exchanges lack basic consumer protections, like insurance protection from the Securities Investor Protection Corp. and the Federal Deposit Insurance Corp., found in traditional financial products.
🤓
Nerdy Tip
If you're worried about keeping your crypto with an exchange, consider moving your digital assets to a separate
crypto wallet
. Most exchanges allow you to transfer assets to these wallets, which can be online (on a separate platform) or offline (on a thumb drive with added security features).
What kind of investment is Bitcoin?
After more than a decade in existence, there’s still debate over what kind of investment Bitcoin is. Owning Bitcoin is not like owning stock in a company. Unlike a business, Bitcoin doesn't generate revenue by selling products or services. It doesn't issue dividends. It also doesn’t have a CEO, board of directors or any other centralized group that sets goals or that can be held accountable.
Some have argued Bitcoin should still be considered a security. Others suggest it is a commodity.
Commodities
are associated with raw materials like metal, grain and milk. Commodity markets are regulated by the Commodity Futures Trading Commission, which also regulates foreign currency trading and is the government agency most active in cryptocurrency regulation.
Still others say it’s a currency — something you can use to pay for goods and services. While there are businesses that accept Bitcoin, it’s far from being a widespread practice.
There’s also the possibility that it’s a new asset class altogether.
Is Bitcoin a good portfolio diversifier?
Bitcoin is, in form and in function, very different from other investment assets such as stocks, bonds and gold. With that in mind, some financial advisors say that buying a small amount of Bitcoin could be beneficial in terms of
investment diversification
.
“I think that investors could cap their allocation to crypto at 5%, and long term, they would still be able to reap the benefits of being exposed to the asset class if it does 10x like its biggest proponents hope, but also reduce the chances of being wiped out by it if the asset class goes to zero tomorrow, which is also possible,” Malcolm Ethridge, a financial planner with Maryland-based registered investment advisor CIC Wealth, said in a 2024 email interview.
As we mentioned previously, another common rule of thumb is to cap your exposure to risky assets such as crypto and individual stocks at 10%, and to invest the rest in index funds.
However, it's worth repeating that Bitcoin's price movements are not necessarily independent of the stock market's movements. For example, the S&P 500 index had negative returns in 2022, but so did Bitcoin. Cryptocurrencies are not stocks, but they have often behaved as high-risk, high-potential-reward investment assets — much like certain kinds of stocks.
Is Bitcoin a hedge against inflation?
Some Bitcoin advocates claim that the cryptocurrency could act as a hedge against the erosion of the dollar's purchasing power — in other words, as a hedge against
inflation
. So how has Bitcoin performed throughout the high-inflation years of the 2020s? Decently well, although not always consistently.
The Federal Reserve generally tries to maintain an inflation rate of around 2%, but for much of this decade, it's been well above that number. The U.S. experienced an inflation rate of 3% or higher from April 2021 through June 2024, according to the Bureau of Labor Statistics, with a peak rate of 9.1% in June 2022
. From April 2021 to June 2024, the price of Bitcoin rose about 18%.
However, Bitcoin doesn't always rise in sync with inflation on a short-term basis. The time period from April 2021 (when inflation first rose above 3%) to June 2022 (when inflation peaked at 9.1%) actually saw a sharp drop in the price of Bitcoin — a drop of more than 40%, although the cryptocurrency recovered in the following years.
So while investing in Bitcoin may provide some protection against inflation in the long term, it would be an oversimplification to say that Bitcoin always goes up when the real value of the dollar goes down.
How is Bitcoin taxed?
If you're investing in Bitcoin in a taxable brokerage account or a crypto app, you'll generate a capital gains tax bill when you sell it. If you held your Bitcoin for one year or less before selling it, you'll pay short-term capital gains rates, which are the same as ordinary income tax rates. If you held it for at least a year and a day, you'll pay long-term capital gains rates, which are typically lower.
Until recently, it generally wasn't possible to invest in Bitcoin in a tax-advantaged account such as an IRA — but the launch of spot Bitcoin ETFs last year changed that. If you open a
Roth IRA
, buy a Bitcoin ETF in it, and then fulfill the conditions for tax-free withdrawals (such as reaching age 59 1/2, or making a first-time home purchase at least five years after funding the account), you could avoid capital gains taxes on Bitcoin entirely.
Bitcoin and volatility
Bitcoin’s exponential growth and ability to maintain its title of most valuable cryptocurrency can mask the fact that its ascent has not been linear.
The upside of
buying Bitcoin
for a dime in 2010 is clear. But with volatility comes big downsides, too. Someone who bought Bitcoin in 2013 would have seen their investment tumble 80% — and it wouldn’t be above water for another three years. Recent highs don't carry the promise of continued returns.
Anyone investing in Bitcoin will hope for the best, but they should be prepared for big downturns, too. While Bitcoin has recovered many times, there's also a possibility that it could go to zero — for example, if several crypto platforms fail and there's a massive sell-off.
Neither the author nor editor held positions in the aforementioned investments at the time of publication. |
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Is Bitcoin a Good Investment?
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NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance.
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# Is Bitcoin a Good Investment?
Bitcoin's seemingly relentless march higher may spark some FOMO, but considering how volatile it is, make sure you understand the risks before investing.
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The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.
Updated
Sep 10, 2025
· 5 min read
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Kurt Woock started writing for NerdWallet in 2021. Prior to joining NerdWallet, Kurt was a writer and educator for Colorado PERA, a retirement system for public employees. Before that he was a legislative editor for the Colorado General Assembly. Kurt has a B.A. from Valparaiso University and an M.A. in journalism from the University of Missouri-Columbia. He lives in Chicago.
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[Bitcoin](https://www.nerdwallet.com/investing/learn/what-is-bitcoin), the largest cryptocurrency by market cap, has been on a journey. Bitcoin's price topped \$100,000 for the first time on Dec. 4, 2024 — a long-awaited milestone spurred by the election of Donald Trump. In 2025, it has sometimes dipped below that mark, but has also hit new highs, such as surpassing \$124,000 in August.
But deciding if Bitcoin has a place in your portfolio requires looking beyond today's headlines.
## Does Bitcoin belong in your portfolio?
Bitcoin is a risky investment with obvious high volatility, and generally should be considered only if you have a high risk tolerance, are in a strong financial position already and can afford to lose some or all of your investment.
If you choose to invest, it’s important to maintain a diversified portfolio that includes several different types of investments to reduce your overall risk exposure. As a rule of thumb, don't invest more than 10% of your portfolio in risky assets like Bitcoin.
» [Learn more about investing in cryptocurrencies](https://www.nerdwallet.com/investing/learn/how-to-buy-cryptocurrency)
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## Investing in Bitcoin
### Bitcoin pros
- Bitcoin historically has offered the potential for high returns.
- It’s decentralized. That said, many people choose to trade and store Bitcoin on centralized platforms.
- Bitcoin has the potential to be a non-correlated asset, similar to gold. This means it may not follow the trends of other assets, like stocks. However, while Bitcoin has had moments of non-correlation with the S\&P 500 in the last decade, it has yet to prove itself as a truly non-correlated asset.
» Want to learn more? See the list of the [best crypto exchanges and platforms](https://www.nerdwallet.com/investing/best/crypto-exchanges-platforms).
### Bitcoin cons
- The price of Bitcoin can go up, as referenced above. It can also go down — a lot. Unlike traditional financial exchanges, crypto exchanges don't have circuit breakers, which automatically pause trading when prices dive too quickly. Crypto markets also trade 24/7, and dramatic dips can happen at any time.
- Transactions are irreversible. People have lost millions of dollars of Bitcoin because they lost or forgot their wallet credentials.
- Crypto exchanges lack basic consumer protections, like insurance protection from the Securities Investor Protection Corp. and the Federal Deposit Insurance Corp., found in traditional financial products.
🤓Nerdy Tip
If you're worried about keeping your crypto with an exchange, consider moving your digital assets to a separate [crypto wallet](https://www.nerdwallet.com/p/best/investing/crypto-bitcoin-wallets). Most exchanges allow you to transfer assets to these wallets, which can be online (on a separate platform) or offline (on a thumb drive with added security features).
## What kind of investment is Bitcoin?
After more than a decade in existence, there’s still debate over what kind of investment Bitcoin is. Owning Bitcoin is not like owning stock in a company. Unlike a business, Bitcoin doesn't generate revenue by selling products or services. It doesn't issue dividends. It also doesn’t have a CEO, board of directors or any other centralized group that sets goals or that can be held accountable.
Some have argued Bitcoin should still be considered a security. Others suggest it is a commodity.
[Commodities](https://www.nerdwallet.com/investing/learn/commodity) are associated with raw materials like metal, grain and milk. Commodity markets are regulated by the Commodity Futures Trading Commission, which also regulates foreign currency trading and is the government agency most active in cryptocurrency regulation.
Still others say it’s a currency — something you can use to pay for goods and services. While there are businesses that accept Bitcoin, it’s far from being a widespread practice.
There’s also the possibility that it’s a new asset class altogether.
## Is Bitcoin a good portfolio diversifier?
Bitcoin is, in form and in function, very different from other investment assets such as stocks, bonds and gold. With that in mind, some financial advisors say that buying a small amount of Bitcoin could be beneficial in terms of [investment diversification](https://www.nerdwallet.com/investing/learn/diversification).
“I think that investors could cap their allocation to crypto at 5%, and long term, they would still be able to reap the benefits of being exposed to the asset class if it does 10x like its biggest proponents hope, but also reduce the chances of being wiped out by it if the asset class goes to zero tomorrow, which is also possible,” Malcolm Ethridge, a financial planner with Maryland-based registered investment advisor CIC Wealth, said in a 2024 email interview.
As we mentioned previously, another common rule of thumb is to cap your exposure to risky assets such as crypto and individual stocks at 10%, and to invest the rest in index funds.
However, it's worth repeating that Bitcoin's price movements are not necessarily independent of the stock market's movements. For example, the S\&P 500 index had negative returns in 2022, but so did Bitcoin. Cryptocurrencies are not stocks, but they have often behaved as high-risk, high-potential-reward investment assets — much like certain kinds of stocks.
## Is Bitcoin a hedge against inflation?
Some Bitcoin advocates claim that the cryptocurrency could act as a hedge against the erosion of the dollar's purchasing power — in other words, as a hedge against [inflation](https://www.nerdwallet.com/investing/learn/inflation). So how has Bitcoin performed throughout the high-inflation years of the 2020s? Decently well, although not always consistently.
The Federal Reserve generally tries to maintain an inflation rate of around 2%, but for much of this decade, it's been well above that number. The U.S. experienced an inflation rate of 3% or higher from April 2021 through June 2024, according to the Bureau of Labor Statistics, with a peak rate of 9.1% in June 2022\[1\]
U.S. Bureau of Labor Statistics. [12-month percentage change, Consumer Price Index, selected categories](https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm). Accessed Sep 11, 2025.
[View all sources](https://www.nerdwallet.com/investing/learn/is-bitcoin-a-good-investment#citation-list)
. From April 2021 to June 2024, the price of Bitcoin rose about 18%.
However, Bitcoin doesn't always rise in sync with inflation on a short-term basis. The time period from April 2021 (when inflation first rose above 3%) to June 2022 (when inflation peaked at 9.1%) actually saw a sharp drop in the price of Bitcoin — a drop of more than 40%, although the cryptocurrency recovered in the following years.
So while investing in Bitcoin may provide some protection against inflation in the long term, it would be an oversimplification to say that Bitcoin always goes up when the real value of the dollar goes down.
## How is Bitcoin taxed?
If you're investing in Bitcoin in a taxable brokerage account or a crypto app, you'll generate a capital gains tax bill when you sell it. If you held your Bitcoin for one year or less before selling it, you'll pay short-term capital gains rates, which are the same as ordinary income tax rates. If you held it for at least a year and a day, you'll pay long-term capital gains rates, which are typically lower.
» More on Bitcoin taxes: [Cryptocurrency tax calculator](https://www.nerdwallet.com/taxes/calculators/crypto-tax-calculator)
Until recently, it generally wasn't possible to invest in Bitcoin in a tax-advantaged account such as an IRA — but the launch of spot Bitcoin ETFs last year changed that. If you open a [Roth IRA](https://www.nerdwallet.com/retirement/learn/what-is-a-roth-ira), buy a Bitcoin ETF in it, and then fulfill the conditions for tax-free withdrawals (such as reaching age 59 1/2, or making a first-time home purchase at least five years after funding the account), you could avoid capital gains taxes on Bitcoin entirely.
## Bitcoin and volatility
Bitcoin’s exponential growth and ability to maintain its title of most valuable cryptocurrency can mask the fact that its ascent has not been linear.
The upside of [buying Bitcoin](https://www.nerdwallet.com/investing/learn/how-to-invest-in-bitcoin) for a dime in 2010 is clear. But with volatility comes big downsides, too. Someone who bought Bitcoin in 2013 would have seen their investment tumble 80% — and it wouldn’t be above water for another three years. Recent highs don't carry the promise of continued returns.
Anyone investing in Bitcoin will hope for the best, but they should be prepared for big downturns, too. While Bitcoin has recovered many times, there's also a possibility that it could go to zero — for example, if several crypto platforms fail and there's a massive sell-off.
Neither the author nor editor held positions in the aforementioned investments at the time of publication.
Article sources
NerdWallet writers are subject matter authorities who use primary, trustworthy sources to inform their work, including peer-reviewed studies, government websites, academic research and interviews with industry experts. All content is fact-checked for accuracy, timeliness and relevance. You can learn more about NerdWallet's high standards for journalism by reading our [editorial guidelines](https://www.nerdwallet.com/l/nerdwallet-editorial-guidelines).
- [1\.](https://www.nerdwallet.com/investing/learn/is-bitcoin-a-good-investment#citation-x320396641)U.S. Bureau of Labor Statistics. [12-month percentage change, Consumer Price Index, selected categories](https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm). Accessed Sep 11, 2025.
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About the author
[![Kurt Woock]()](https://www.nerdwallet.com/author/kurt-woock)
[Kurt Woock](https://www.nerdwallet.com/author/kurt-woock)
Kurt Woock is a writer at NerdWallet. [See full bio.](https://www.nerdwallet.com/author/kurt-woock)
Helpful resources
[Cryptocurrency Basics: Pros, Cons and How It Works](https://www.nerdwallet.com/investing/learn/cryptocurrency)
[How to Buy Bitcoin (BTC): Quick-Start Guide](https://www.nerdwallet.com/investing/learn/how-to-invest-in-bitcoin)
[What Is Bitcoin? Definition, Basics & How to Use](https://www.nerdwallet.com/investing/learn/what-is-bitcoin)
[Crypto staking: What it is, how it works, calculator](https://www.nerdwallet.com/investing/learn/how-crypto-staking-works)
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4\.8
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[%22%3E%3Cstop%20offset%3D%220%22%20style%3D%22stop-color%3A%2300A0FF%22%2F%3E%3Cstop%20offset%3D%226.569999e-03%22%20style%3D%22stop-color%3A%2300A1FF%22%2F%3E%3Cstop%20offset%3D%220.2601%22%20style%3D%22stop-color%3A%2300BEFF%22%2F%3E%3Cstop%20offset%3D%220.5122%22%20style%3D%22stop-color%3A%2300D2FF%22%2F%3E%3Cstop%20offset%3D%220.7604%22%20style%3D%22stop-color%3A%2300DFFF%22%2F%3E%3Cstop%20offset%3D%221%22%20style%3D%22stop-color%3A%2300E3FF%22%2F%3E%3C%2FlinearGradient%3E%3Cpath%20fill-rule%3D%22evenodd%22%20clip-rule%3D%22evenodd%22%20fill%3D%22url\(%23SVGID_1_\)%22%20d%3D%22M418.4%2C302.1c-11.6%2C12.5-18.3%2C31.6-18.3%2C56.6v886.7c0%2C25%2C6.7%2C44.1%2C18.7%2C56.1l3.1%2C2.7l496.8-496.8v-11.1%20L421.5%2C299.4C421.5%2C299.4%2C418.4%2C302.1%2C418.4%2C302.1z%22%2F%3E%3ClinearGradient%20id%3D%22SVGID_2_%22%20gradientUnits%3D%22userSpaceOnUse%22%20x1%3D%221712.6624%22%20y1%3D%221274.8376%22%20x2%3D%221606.5613%22%20y2%3D%221274.8376%22%20gradientTransform%3D%22matrix\(9.145%200%200%20-7.7%20-14305.5381%2010618.251\)%22%3E%3Cstop%20offset%3D%220%22%20style%3D%22stop-color%3A%23FFE000%22%2F%3E%3Cstop%20offset%3D%220.4087%22%20style%3D%22stop-color%3A%23FFBD00%22%2F%3E%3Cstop%20offset%3D%220.7754%22%20style%3D%22stop-color%3A%23FFA500%22%2F%3E%3Cstop%20offset%3D%221%22%20style%3D%22stop-color%3A%23FF9C00%22%2F%3E%3C%2FlinearGradient%3E%3Cpath%20fill-rule%3D%22evenodd%22%20clip-rule%3D%22evenodd%22%20fill%3D%22url\(%23SVGID_2_\)%22%20d%3D%22M1084%2C973.5L918.3%2C807.8v-11.6L1084%2C630.5l3.6%2C2.2l196%2C111.4c56.1%2C31.6%2C56.1%2C83.8%2C0%2C115.8l-196%2C111.4%20C1087.6%2C971.3%2C1084%2C973.5%2C1084%2C973.5z%22%2F%3E%3ClinearGradient%20id%3D%22SVGID_3_%22%20gradientUnits%3D%22userSpaceOnUse%22%20x1%3D%221707.4414%22%20y1%3D%221290.0475%22%20x2%3D%221646.682%22%20y2%3D%221211.2225%22%20gradientTransform%3D%22matrix\(15.02%200%200%20-11.5775%20-24650.2285%2015829.6484\)%22%3E%3Cstop%20offset%3D%220%22%20style%3D%22stop-color%3A%23FF3A44%22%2F%3E%3Cstop%20offset%3D%221%22%20style%3D%22stop-color%3A%23C31162%22%2F%3E%3C%2FlinearGradient%3E%3Cpath%20fill%3D%22url\(%23SVGID_3_\)%22%20fill-rule%3D%22evenodd%22%20clip-rule%3D%22evenodd%22%20d%3D%22M1087.6%2C971.3L918.3%2C802l-499.9%2C499.9c18.3%2C19.6%2C49%2C21.8%2C83.3%2C2.7L1087.6%2C971.3%22%2F%3E%3ClinearGradient%20id%3D%22SVGID_4_%22%20gradientUnits%3D%22userSpaceOnUse%22%20x1%3D%221660.6357%22%20y1%3D%221365.6676%22%20x2%3D%221687.767%22%20y2%3D%221330.4501%22%20gradientTransform%3D%22matrix\(15.02%200%200%20-11.5715%20-24650.2285%2015809.9922\)%22%3E%3Cstop%20offset%3D%220%22%20style%3D%22stop-color%3A%2332A071%22%2F%3E%3Cstop%20offset%3D%226.850000e-02%22%20style%3D%22stop-color%3A%232DA771%22%2F%3E%3Cstop%20offset%3D%220.4762%22%20style%3D%22stop-color%3A%2315CF74%22%2F%3E%3Cstop%20offset%3D%220.8009%22%20style%3D%22stop-color%3A%2306E775%22%2F%3E%3Cstop%20offset%3D%221%22%20style%3D%22stop-color%3A%2300F076%22%2F%3E%3C%2FlinearGradient%3E%3Cpath%20fill%3D%22url\(%23SVGID_4_\)%22%20fill-rule%3D%22evenodd%22%20enable-background%3D%22new%22%20clip-rule%3D%22evenodd%22%20d%3D%22M1087.6%2C632.7L501.7%2C299.9c-34.3-19.6-65.1-16.9-83.3%2C2.7L918.3%2C802L1087.6%2C632.7z%22%2F%3E%3Cpath%20fill-rule%3D%22evenodd%22%20clip-rule%3D%22evenodd%22%20opacity%3D%220.2%22%20d%3D%22M1084%2C967.7l-581.9%2C330.6c-32.5%2C18.7-61.5%2C17.4-80.2%2C0.4l-3.1%2C3.1l3.1%2C2.7c18.7%2C16.9%2C47.7%2C18.3%2C80.2-0.4%20L1088%2C971.3C1088%2C971.3%2C1084%2C967.7%2C1084%2C967.7z%22%2F%3E%3Cpath%20fill-rule%3D%22evenodd%22%20clip-rule%3D%22evenodd%22%20opacity%3D%220.12%22%20enable-background%3D%22new%22%20d%3D%22M1283.6%2C854.1l-200.1%2C113.6l3.6%2C3.6l196-111.4c28.1-16%2C41.9-37%2C41.9-57.9C1323.3%2C821.2%2C1309%2C839.4%2C1283.6%2C854.1%20z%22%2F%3E%3Cpath%20fill-rule%3D%22evenodd%22%20clip-rule%3D%22evenodd%22%20opacity%3D%220.25%22%20enable-background%3D%22new%22%20d%3D%22M501.7%2C305.7l781.9%2C444.2c25.4%2C14.3%2C39.7%2C33%2C41.9%2C52.1c0-20.9-13.8-41.9-41.9-57.9L501.7%2C299.9%20c-56.1-32.1-101.6-5.3-101.6%2C58.8v5.8C400.1%2C300.3%2C445.6%2C274%2C501.7%2C305.7z%22%2F%3E%3C%2Fsvg%3E)](https://nerdwallet.onelink.me/3687710914/233a7a41)
4\.3
31,200+ reviews
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NerdWallet Compare, Inc. NMLS ID\# 1617539
[NMLS Consumer Access](https://www.nmlsconsumeraccess.org/EntityDetails.aspx/COMPANY/1617539) \| [Licenses and Disclosures](https://www.nerdwallet.com/p/nerdwallet-compare-inc-licenses-and-disclosures)
California: California Finance Lender loans arranged pursuant to Department of Financial Protection and Innovation Finance Lenders License \#60DBO-74812
Insurance Services offered through NerdWallet Insurance Services, Inc. (CA resident license no.OK92033) [Insurance Licenses](https://www.nerdwallet.com/nerdwallet-insurance-services-inc-licenses-and-disclosures)
Fundera, Inc. NMLS ID\# 1240038
[NMLS Consumer Access](https://nmlsconsumeraccess.org/)
California: California Finance Lender loans arranged pursuant to the Department of Financial Protection and Innovation Finance Lenders License \#603L288
NerdWallet has engaged Atomic Invest LLC (“Atomic”), an SEC-registered investment adviser, to bring you the opportunity to open investment advisory accounts (Automated Investing Account and/or Treasury Account) with Atomic. NerdWallet receives compensation of 0% to 0.85% of assets under management annualized, payable monthly, for each referred client who opens an Atomic account and a percentage of free cash interest earned by clients, which creates a conflict of interest. Brokerage services for Atomic are provided by Atomic Brokerage LLC ("Atomic Brokerage"), member of [FINRA](https://www.finra.org/#/)/[SIPC](https://www.sipc.org/) and an affiliate of Atomic, which creates a conflict of interest. See details about Atomic, in their [Form CRS](https://reports.adviserinfo.sec.gov/crs/crs_313255.pdf), [Form ADV Part 2A](https://adviserinfo.sec.gov/firm/brochure/313255) and [Privacy Policy](https://legal.atomicvest.com/usa.privacy.de3d0277-78f7-4741-9e9f-755f6b4f03ba.pdf). See details about Atomic Brokerage in their [Form CRS](https://files.brokercheck.finra.org/crs_315263.pdf), [General Disclosures](https://legal.atomicvest.com/usa.broker.disclosures.003464f3-f6bd-41c3-bbdf-7050e50b43a2.pdf), [fee schedule](https://legal.atomicvest.com/usa.broker.schedule.7ea28665-88a9-4542-a748-987e90ea46b6.pdf), and FINRA’s [BrokerCheck](https://brokercheck.finra.org/).
You also can open a Cash Account offered by Atomic Brokerage which allows you to earn interest on your cash through a cash sweep program. [View Important Cash Account Disclosures.](https://www.atomicvest.com/legal/disclosures/7d9c31dd-bf97-46ae-9803-1774b97187af)
Neither Atomic Invest nor Atomic Brokerage, nor any of their affiliates is a bank. Investments in securities: Not FDIC Insured, Not Bank Guaranteed, May Lose Value. Investing involves risk, including the possible loss of principal. Before investing, consider your investment objectives and the fees and expenses charged.
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NerdWallet™ \| 4150 N Drinkwater Blvd, Suite 200, Scottsdale, AZ 85251
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NerdWallet USA
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[%22%3E%3Cg%20clip-path%3D%27url\(%23clipCA\)%27%3E%3Cpath%20d%3D%22M22.81%201H1.42V15.58H22.81V1Z%22%20stroke%3D%22currentColor%22%20strokeMiterlimit%3D%2210%22%20strokeLinejoin%3D%22round%22%20%2F%3E%3Cpath%20d%3D%22M14.7425%2010.5472C14.7961%2010.4936%2017%208.56438%2017%208.56438L16.6245%208.40343C16.4099%208.29828%2016.4657%208.15665%2016.5172%208.03004C16.5687%207.86695%2016.9485%206.58584%2016.9485%206.58584C16.9485%206.58584%2015.9249%206.80043%2015.7103%206.85408C15.5494%206.90558%2015.4957%206.80043%2015.4421%206.69313C15.3884%206.58584%2015.1202%205.99785%2015.1202%205.99785C15.1202%205.99785%2013.9914%207.28326%2013.9378%207.33476C13.7232%207.49571%2013.5064%207.33476%2013.5601%207.12017C13.5601%206.90558%2014.1524%204.33906%2014.1524%204.33906C14.1524%204.33906%2013.5064%204.71245%2013.2918%204.81974C13.1309%204.92704%2013.0215%204.92704%2012.9142%204.71245C12.8047%204.5515%2011.9979%203%2011.9979%203C11.9979%203%2011.1931%204.5515%2011.0858%204.71245C10.9785%204.92704%2010.8712%204.92704%2010.7082%204.81974C10.4936%204.71245%209.84764%204.33906%209.84764%204.33906C9.84764%204.33906%2010.4399%206.90558%2010.4399%207.12017C10.4936%207.33476%2010.279%207.49571%2010.0622%207.33476C10.0086%207.28112%208.87983%205.99785%208.87983%205.99785C8.87983%205.99785%208.61159%206.58369%208.55794%206.69099C8.50429%206.79828%208.45064%206.90343%208.2897%206.85193C8.07296%206.79828%207.0515%206.58369%207.0515%206.58369C7.0515%206.58369%207.42918%207.86481%207.48283%208.0279C7.53433%208.15665%207.59013%208.29614%207.37554%208.40129L7%208.56438C7%208.56438%209.20172%2010.4936%209.25751%2010.5472C9.36695%2010.6545%209.4721%2010.7082%209.36695%2011.03C9.25751%2011.3519%209.15021%2011.7833%209.15021%2011.7833C9.15021%2011.7833%2011.1931%2011.3519%2011.4099%2011.2983C11.5966%2011.279%2011.8026%2011.3519%2011.8026%2011.5665C11.8026%2011.7811%2011.6781%2013.9871%2011.6781%2013.9871H12.3219C12.3219%2013.9871%2012.1974%2011.7833%2012.1974%2011.5665C12.1974%2011.3498%2012.4013%2011.279%2012.5923%2011.2983C12.8069%2011.3519%2014.8498%2011.7833%2014.8498%2011.7833C14.8498%2011.7833%2014.7425%2011.3519%2014.6352%2011.03C14.5279%2010.7082%2014.6352%2010.6545%2014.7425%2010.5472Z%22%20fill%3D%22currentColor%22%20%2F%3E%3Crect%20x%3D%221%22%20y%3D%221%22%20width%3D%225%22%20height%3D%2215%22%20fill%3D%22currentColor%22%20%2F%3E%3Crect%20x%3D%2218%22%20y%3D%221%22%20width%3D%225%22%20height%3D%2215%22%20fill%3D%22currentColor%22%20%2F%3E%3C%2Fg%3E%3Cdefs%3E%3CclipPath%20id%3D%27clipCA%27%3E%3Crect%20width%3D%2228%22%20height%3D%2220%22%20fill%3D%22currentColor%22%20%2F%3E%3C%2FclipPath%3E%3C%2Fdefs%3E%3C%2Fsvg%3E) NerdWallet CA](https://www.nerdwallet.com/ca)
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| Readable Markdown | [Bitcoin](https://www.nerdwallet.com/investing/learn/what-is-bitcoin), the largest cryptocurrency by market cap, has been on a journey. Bitcoin's price topped \$100,000 for the first time on Dec. 4, 2024 — a long-awaited milestone spurred by the election of Donald Trump. In 2025, it has sometimes dipped below that mark, but has also hit new highs, such as surpassing \$124,000 in August.
But deciding if Bitcoin has a place in your portfolio requires looking beyond today's headlines.
Does Bitcoin belong in your portfolio?
Bitcoin is a risky investment with obvious high volatility, and generally should be considered only if you have a high risk tolerance, are in a strong financial position already and can afford to lose some or all of your investment.
If you choose to invest, it’s important to maintain a diversified portfolio that includes several different types of investments to reduce your overall risk exposure. As a rule of thumb, don't invest more than 10% of your portfolio in risky assets like Bitcoin.
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|---|---|---|
| NerdWallet rating [5\.0 /5](https://www.nerdwallet.com/investing/reviews/webull) | NerdWallet rating [4\.7 /5](https://www.nerdwallet.com/investing/reviews/uphold) | NerdWallet rating [4\.5 /5](https://www.nerdwallet.com/investing/reviews/coinbase) |
| Fees \$0 per trade | Fees 2%-5.5% | Fees 0% - 5% varies by type of transaction; other fees may apply |
| Account minimum \$0 | Account minimum \$1 | Account minimum \$0 |
| Promotion Up to 4% match (up to \$2M) when you open and fund an account with Webull | Promotion None no promotion available at this time | Promotion None no promotion available at this time |
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Investing in Bitcoin
Bitcoin pros
- Bitcoin historically has offered the potential for high returns.
- It’s decentralized. That said, many people choose to trade and store Bitcoin on centralized platforms.
- Bitcoin has the potential to be a non-correlated asset, similar to gold. This means it may not follow the trends of other assets, like stocks. However, while Bitcoin has had moments of non-correlation with the S\&P 500 in the last decade, it has yet to prove itself as a truly non-correlated asset.
Bitcoin cons
- The price of Bitcoin can go up, as referenced above. It can also go down — a lot. Unlike traditional financial exchanges, crypto exchanges don't have circuit breakers, which automatically pause trading when prices dive too quickly. Crypto markets also trade 24/7, and dramatic dips can happen at any time.
- Transactions are irreversible. People have lost millions of dollars of Bitcoin because they lost or forgot their wallet credentials.
- Crypto exchanges lack basic consumer protections, like insurance protection from the Securities Investor Protection Corp. and the Federal Deposit Insurance Corp., found in traditional financial products.
🤓Nerdy Tip
If you're worried about keeping your crypto with an exchange, consider moving your digital assets to a separate [crypto wallet](https://www.nerdwallet.com/p/best/investing/crypto-bitcoin-wallets). Most exchanges allow you to transfer assets to these wallets, which can be online (on a separate platform) or offline (on a thumb drive with added security features).
What kind of investment is Bitcoin?
After more than a decade in existence, there’s still debate over what kind of investment Bitcoin is. Owning Bitcoin is not like owning stock in a company. Unlike a business, Bitcoin doesn't generate revenue by selling products or services. It doesn't issue dividends. It also doesn’t have a CEO, board of directors or any other centralized group that sets goals or that can be held accountable.
Some have argued Bitcoin should still be considered a security. Others suggest it is a commodity.
[Commodities](https://www.nerdwallet.com/investing/learn/commodity) are associated with raw materials like metal, grain and milk. Commodity markets are regulated by the Commodity Futures Trading Commission, which also regulates foreign currency trading and is the government agency most active in cryptocurrency regulation.
Still others say it’s a currency — something you can use to pay for goods and services. While there are businesses that accept Bitcoin, it’s far from being a widespread practice.
There’s also the possibility that it’s a new asset class altogether.
Is Bitcoin a good portfolio diversifier?
Bitcoin is, in form and in function, very different from other investment assets such as stocks, bonds and gold. With that in mind, some financial advisors say that buying a small amount of Bitcoin could be beneficial in terms of [investment diversification](https://www.nerdwallet.com/investing/learn/diversification).
“I think that investors could cap their allocation to crypto at 5%, and long term, they would still be able to reap the benefits of being exposed to the asset class if it does 10x like its biggest proponents hope, but also reduce the chances of being wiped out by it if the asset class goes to zero tomorrow, which is also possible,” Malcolm Ethridge, a financial planner with Maryland-based registered investment advisor CIC Wealth, said in a 2024 email interview.
As we mentioned previously, another common rule of thumb is to cap your exposure to risky assets such as crypto and individual stocks at 10%, and to invest the rest in index funds.
However, it's worth repeating that Bitcoin's price movements are not necessarily independent of the stock market's movements. For example, the S\&P 500 index had negative returns in 2022, but so did Bitcoin. Cryptocurrencies are not stocks, but they have often behaved as high-risk, high-potential-reward investment assets — much like certain kinds of stocks.
Is Bitcoin a hedge against inflation?
Some Bitcoin advocates claim that the cryptocurrency could act as a hedge against the erosion of the dollar's purchasing power — in other words, as a hedge against [inflation](https://www.nerdwallet.com/investing/learn/inflation). So how has Bitcoin performed throughout the high-inflation years of the 2020s? Decently well, although not always consistently.
The Federal Reserve generally tries to maintain an inflation rate of around 2%, but for much of this decade, it's been well above that number. The U.S. experienced an inflation rate of 3% or higher from April 2021 through June 2024, according to the Bureau of Labor Statistics, with a peak rate of 9.1% in June 2022
. From April 2021 to June 2024, the price of Bitcoin rose about 18%.
However, Bitcoin doesn't always rise in sync with inflation on a short-term basis. The time period from April 2021 (when inflation first rose above 3%) to June 2022 (when inflation peaked at 9.1%) actually saw a sharp drop in the price of Bitcoin — a drop of more than 40%, although the cryptocurrency recovered in the following years.
So while investing in Bitcoin may provide some protection against inflation in the long term, it would be an oversimplification to say that Bitcoin always goes up when the real value of the dollar goes down.
How is Bitcoin taxed?
If you're investing in Bitcoin in a taxable brokerage account or a crypto app, you'll generate a capital gains tax bill when you sell it. If you held your Bitcoin for one year or less before selling it, you'll pay short-term capital gains rates, which are the same as ordinary income tax rates. If you held it for at least a year and a day, you'll pay long-term capital gains rates, which are typically lower.
Until recently, it generally wasn't possible to invest in Bitcoin in a tax-advantaged account such as an IRA — but the launch of spot Bitcoin ETFs last year changed that. If you open a [Roth IRA](https://www.nerdwallet.com/retirement/learn/what-is-a-roth-ira), buy a Bitcoin ETF in it, and then fulfill the conditions for tax-free withdrawals (such as reaching age 59 1/2, or making a first-time home purchase at least five years after funding the account), you could avoid capital gains taxes on Bitcoin entirely.
Bitcoin and volatility
Bitcoin’s exponential growth and ability to maintain its title of most valuable cryptocurrency can mask the fact that its ascent has not been linear.
The upside of [buying Bitcoin](https://www.nerdwallet.com/investing/learn/how-to-invest-in-bitcoin) for a dime in 2010 is clear. But with volatility comes big downsides, too. Someone who bought Bitcoin in 2013 would have seen their investment tumble 80% — and it wouldn’t be above water for another three years. Recent highs don't carry the promise of continued returns.
Anyone investing in Bitcoin will hope for the best, but they should be prepared for big downturns, too. While Bitcoin has recovered many times, there's also a possibility that it could go to zero — for example, if several crypto platforms fail and there's a massive sell-off.
Neither the author nor editor held positions in the aforementioned investments at the time of publication. |
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