Cryptocurrency as an Investment—and a Retirement Portfolio Asset

Published on May 27, 2025

Bitcoin (BTC) and other cryptocurrencies are a decentralized peer-to-peer electronic currency that can be sent between parties without intermediaries (banks and other financial institutions). The currency is “mined” on vast computer networks and transactions are secured with cryptographic signatures that protect users’ wallets where the currency is stored.

The first block of Bitcoin was mined in January 2009. Other “alt coins” have followed, such as Ethereum. When cryptocurrency burst onto the financial scene, people struggled to understand what BTC and other digital currencies were and how they worked—not to mention blockchain, the technology that records crypto transactions in a shared public digital ledger.

While there is a lot of wonky information to digest around Bitcoin and other cryptocurrencies, suffice to say it has become more popular as an alternative asset among investors; that’s because in addition to being used to pay for everyday goods and services, it can also be traded at, one hopes, a profit as its value fluctuates.

Investing in Bitcoin and other crypto

Although Bitcoin and the crypto market in general have seen some turbulence in the past few years, Binance Research reported this month that the OG of cryptocurrencies has regained its dominant position with a four-year high of 63% as the cryptocurrency market cap rose by 9.9% in April. As an asset class, crypto’s combined market capitalization (all coins) of almost $3T at the end of April.

Bitcoin’s price is volatile, but the asset has gained popularity and is going more mainstream today. It has gained acceptance through exchange traded funds (ETFs) and other traditional channels for investors, as well as the current administration’s acceptance of the asset, with some relaxation of the regulations designed to protect investors against fraud and money laundering schemes.

Anyone with valid ID and bank account can invest in crypto in several ways. These are the most common:
• Buy the coins directly via a cryptocurrency exchange platform
• Online exchanges make it easy to buy and sell the asset; some are regulated while others offer less protection but greater access to new coins.
• Invest in crypto-related companies or funds such as a blockchain ETF (that comprises multiple companies)
• Become a crypto miner, which typically requires investing in mining software and hardware
• Include crypto investments in a self-directed IRA that is managed by a custodian that accepts the digital currency and/or partners with a platform for those transactions

Investor beware

Cryptocurrency is still becoming more accepted and understood, and as noted above, the crypto market is volatile. As with other alternative assets allowed in self-directed retirement plans, crypto may be best considered a long-term investment, as its value can shift wildly from week to week (and sometimes, day to day).

Therefore, as with investments of any alternative asset, individuals should conduct their full due diligence about how crypto trading works and understand the risks involved in these investments. Research the crypto exchanges, transaction fees, different crypto wallets, and the tax liabilities related to cryptocurrency transactions before making the investment. Note that cryptocurrencies are considered as property, not actual currency, by the IRS, so there may be taxable capital gains associated with the investment’s performance.

Building retirement wealth via crypto

Anyone who is savvy about how blockchain technology works and understands cryptocurrency can include the asset in a retirement plan. Self-direction allows individuals to develop more diverse retirement portfolios by including many alternative assets—including crypto. For people who are comfortable doing their own due diligence and making their own investment decisions, including Bitcoin and other cryptocurrencies in their self-directed IRAs are certainly one way to create that diversity. Understanding the risks and mechanics of this investment is the first step.