Introduction

Cryptocurrencies have been a hot topic for several years now, and the question “What do you think about crypto?” is one that every finance enthusiast or expert gets asked regularly.

They attract many investors (or speculators? We’ll clarify this later in the article), often not very well-informed but tempted by the extraordinary growth Bitcoin experienced in past years.

Bitcoin’s value over the years

Unfortunately, they also tend to attract fervent supporters, which we prefer to stay away from in order to maintain a balanced perspective.

Like any financial product or instrument, cryptocurrencies are not inherently “good” or “bad”; their suitability depends on your goals, how much of your portfolio they represent, and your risk tolerance.

But let’s take things step by step and start with the definition of cryptocurrency.

What Is a Cryptocurrency?

A cryptocurrency is a form of digital currency that uses cryptography to secure transactions and to control the creation of new units.

It is decentralized, meaning it is not regulated by a central authority such as a bank or government, and it relies on a technology called blockchain, which acts as a public and immutable ledger of all transactions.

The most well-known—and the first—cryptocurrency ever created is Bitcoin.

In a now-famous 2008 whitepaper, Satoshi Nakamoto (a pseudonym— the real identity of the creator or creators is still unknown) described it as a Peer-to-Peer Electronic Cash System.

Excerpt from Satoshi Nakamoto’s Bitcoin whitepaper

The original intention, therefore, was to create a payment system that ensured secure exchanges without the need for institutions or trust in the counterparty.

Philosopher Nassim Taleb (if you’ve never read his books, we recommend checking out [this article]) described cryptocurrencies as an “insurance policy against an Orwellian future,” noting how a currency not controlled by a central authority could give full freedom to its users and protect them from dystopian control scenarios.

Following Bitcoin’s example, many other cryptocurrencies (known as “altcoins”) have been created over the years, each with different features and structures but similar goals.

In reality, though, both Bitcoin and the others are still far from achieving their original purpose—and are drifting even further away—as they’re gradually being absorbed by the traditional financial system.

Cryptocurrencies still face well-known problems: high price volatility and lack of mass adoption, despite growing popularity.

These obstacles keep them from becoming a true alternative to traditional fiat currencies like the euro or the dollar.

That’s why today, they are considered purely speculative assets.

But beware: this doesn’t mean speculation is inherently negative. In everyday language, the word has taken on a negative connotation, but in the financial world, it’s a much more neutral concept.

To speculate simply means to try to make a profit by selling an asset at a higher price than it was bought for.

If I buy a stock and sell it at a higher price, I’m speculating.

The same applies to real estate speculation—buying a property with the sole aim of reselling it for more.

Cryptocurrencies currently have no intrinsic value (they don’t generate cash flow, as they don’t pay interest or dividends), and they are not true currencies.

Therefore, the only reason to hold them in a portfolio is the hope that they will increase in value over time—and that someone will be willing to buy them at a higher price in the future.

Like any other speculative asset, they should only represent a small portion of your portfolio.

Security and Risks

A crucial aspect to consider is security. While decentralization is certainly interesting and positive, it also raises additional concerns when it comes to safety, since cryptocurrencies are not held or protected by any central authority.

The transactions themselves are secure: blockchain technology, combined with validation mechanisms like “proof of work” and “proof of stake,” makes it virtually impossible to alter or falsify transactions. This is a clear advantage.

The real security issue lies in the custody of the cryptocurrencies.

Where should you store them, even if they are virtual?

In essence, there are two options: keeping them on an exchange or in a wallet.

Exchanges are intermediaries through which you can buy and sell cryptocurrencies. Although their main purpose is trading, many of them also offer custody services.

However, since they are not backed by any central authority, there is always a counterparty risk—if the exchange fails, you may not get your assets back.

Unfortunately, not all exchanges are solid and reliable. There have been several well-known cases of spectacular failures in the past—not to mention outright scams.

So, if you choose to store your crypto on an exchange, it’s crucial to ensure that it is robust and well-regulated; ideally, it should also be publicly listed, as that adds an additional layer of oversight and transparency.

The alternative is to use a wallet—a tool to store your Bitcoin or other crypto assets.

Wallets fall into two categories:

• Hot wallets: software, apps, or browser extensions—digital tools to store your crypto.
• Cold wallets: physical devices like hard drives or USB sticks used for offline storage.

Cold wallets are the safest option, as they offer greater security and control. However, they are more complex to manage and involve additional costs.

Therefore, for small amounts, keeping crypto on a secure exchange can be considered. But if you hold significant sums, it is definitely worth taking the time to evaluate and invest in a reliable wallet.

Do Cryptocurrencies Still Make Sense as an Investment?

Once we’ve defined the “playing field,” it’s fair to ask whether there are still investment opportunities in cryptocurrencies today.

Unfortunately, without a crystal ball, we can’t be certain about the future returns of this asset. However, some observations can still be made.

It’s unlikely that we’ll see the extraordinary returns of Bitcoin’s early years again, as it has now reached a certain level of maturity and a much higher base value.

Replicating those same performances would mean a single Bitcoin reaching a value of tens of millions of euros.

Trying to strike it rich with Bitcoin today is quite unrealistic; likewise, betting on the “next winning altcoin” is akin to gambling at a casino.

This doesn’t mean it’s impossible to achieve positive results nowadays, but it certainly doesn’t make sense to jump in with the same enthusiasm as those who experienced the explosive gains of a decade ago—when crypto was still largely a niche gamble.

There’s also another very important aspect to consider: cryptocurrencies are considered “risk-on” assets, meaning they tend to perform well when there is a high appetite for risk—just like stocks.

In fact, there’s a strong correlation between the performance of major stock indices, particularly tech-heavy ones, and that of cryptocurrencies.

Crypto often suffers during periods of risk aversion and thrives when investors are chasing higher returns.

That’s another reason why it’s wise to allocate only a modest portion of your portfolio to crypto—since it can act as an amplifier of the riskiest parts of your investments.

Of course, every situation is unique, and there are no one-size-fits-all rules because risk tolerance depends on many factors, such as income stability, whether you have children, your personal mindset, and so on.

That’s why, before even thinking about potential returns, you need to build a solid financial plan that takes all these variables into account.

Only then can you decide whether it makes sense to dedicate 2%, 5%, or 10% of your portfolio to crypto based on your specific situation.

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