“If you’re very risk-averse, I would not recommend investing in crypto,” Holt continues. “It’s not something I would do as a casual investor generally. But for people who are not risk-averse—who would accept a higher degree of loss—this is a reasonable investment.”
In general, Holt recommends those interested in taking the plunge invest in cryptocurrencies that are well known. There are more than 9,000 different cryptocurrencies in existence as of April 2021, but more established cryptos like Bitcoin, Ethereum and Litecoin might be a good place to start. (Think of it like in- vesting in an established economy versus a developing economy.)
“There are so many variations,” Holt says. “Do your due diligence—don’t just pick [a new cryptocurrency] that was pumped up once on a podcast. Treat it like you would any other vendor. If you just buy $100 worth of some far-flung crypto, you may never get that money back. This is a space that can be pretty easy to scam people, so due diligence is tremendously important.”
When deciding which cryptocurrency to invest in, you’ll find countless articles with advice and tips from financial experts on sites like TIME, Forbes, Business Insider, CNBC, Investopedia, etc. Ideally, a financial advisor would be able to guide you on which cryptos to consider adding to your portfolio and how much, but many advisors don’t recognize crypto as an investable asset class like stocks or bonds. Companies like Edward Jones and Fidelity have cryptocurrency primers on their websites, but clearly state that their customers cannot buy or sell crypto through them.
Holt also suggests beginner investors start by buying crypto and sitting on it.
“I would be very careful about investing with the notion that you’re going to turn it around quickly and sell it off,” he says. “Look at it as a broader portfolio investment. Start slow and build your way to being comfortable with it.”
Holt adds that for environmentally conscious individuals, some cryptocurrencies have a lower carbon footprint than others. New crypto is created or “mined” by using computers to complete very difficult math equations. Solving a Bitcoin equation requires more computing power than currencies such as Dogecoin or Ethereum, which means it uses more electricity per coin mined.
Crypto may be hot right now, but with its volatility, will it stay that way? Is it the future of finance?
“It’s possible,” Holt says. “I think that hard currencies are always going to have a specific role. At the moment, it seems like crypto is just another type of commodity or stock. But the blockchain and accountability component makes it attractive. It could certainly happen over time, but would maybe require some generational changes before that could take root.”
