“Tales from the Crypt-o”
The recent rally in bitcoin and other cryptocurrencies reflects improving conditions that have lifted all asset classes, as well as specific policy changes in Washington and growing interest among institutional investors. How can investors maintain a portfolio perspective when considering these assets, rather than viewing them as standalone investments?
Bitcoin has surged to new highs in 2025 as Congress took major steps toward reshaping the regulatory landscape for digital assets during “Crypto Week,” which concluded on July 20. Three major crypto-related bills were at the center of the week: the GENIUS Act, which regulates stablecoins (digital currencies designed to maintain their value which are often pegged to the U.S. dollar); the CLARITY Act, which would provide a clearer framework for regulating cryptocurrencies; and the Anti-CBDC Surveillance State Act, which prevents the Federal Reserve from creating a digital currency. The GENIUS Act was signed into law on July 18, 2025 and the other two have advanced toward final votes in the Senate.
In general, bitcoin and other cryptocurrencies attract investor attention due to their extreme market moves, growing interest among institutional investors, new vehicles such as ETFs, and concerns over fiscal and monetary trends. Many of these topics are complex and speculative. For long-term investors, the most important question is whether cryptocurrencies fit within a portfolio that is constructed to achieve financial planning goals, not whether leaving them out will lead to “FOMO” (the fear of missing out).
The reality is that bitcoin experiences price fluctuations several times greater than the stock market. During 2022, for example, bitcoin fell about 65% while the S&P 500 declined about 20%. This demonstrates that digital currencies can amplify portfolio risk during times of market stress.
Despite inching closer to regulation, the downsides to using and/or investing in bitcoin and other cryptos must still be acknowledged. In addition to price volatility, other considerations include:
It is important to separate bitcoin and other crypto assets from the concepts and technology of blockchain, which can best be described as a type of secure electronic ledger. As blockchain continues to evolve, its wide range of practical uses ensures it will remain a foundational technology for years to come. Many securities include exposure to companies that are incorporating blockchain technologies, by either delivering the chips that drive the computers or providing software, marketing, custody, and other technologies that are the backbone of blockchain.
While some investors are cheered by the thought of having exposure to blockchain technologies, including cryptocurrencies, others are not so sanguine. Just how much crypto could be lurking in a U.S. large blend fund, anyway?
A few companies have direct exposure to bitcoin on their balance sheets, while others operate in the crypto ecosystem or offer bitcoin-related services. However, when you add it all up the total weight of bitcoin-related companies and bitcoin ownership is well below 1% of US large-cap indexes. Diversifying among other asset classes within the US as well as internationally will decrease that exposure even further.
Between these companies, the traditional finance companies who are investing in the ability to transact in stablecoins, and the companies incorporating blockchain technology, many investors already have some exposure to crypto. However, that doesn’t introduce the same level of risk to a portfolio as investing directly in bitcoin or another cryptocurrency. The beauty of diversification is the ability to have exposure to and benefit from many areas of the market without taking on untenable asset-specific risk.
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