Crypto’s Place in Financial Plans: Sorting Story from Strategy

In mid-July, Congress passed legislation establishing a new regulatory framework for digital assets, offering long-awaited clarity on how crypto may fit into the broader financial system.  As a result, we’ve seen a rise in digital asset prices and renewed investor interest, including questions about whether crypto has earned a place in a long-term portfolio.

Should serious, long-term investors include crypto, or is this another example of speculation being mistaken for strategy?

Here, we’ll provide insight into how we explore this question with our clients, who count on us to help them achieve real, quality-of-life outcomes.

With that as context, the worst thing we can do is allow our clients to risk hard-earned, high-probability outcomes that they need in FOMO-driven pursuit of low-probability outcomes that they don’t need. This lens guides how we evaluate changes to any proven strategy, including digital assets, and can help inoculate investors against this cardinal sin of investing.

Speculation vs. Investing: Protecting Your Portfolio from Risky Bets

Before evaluating any specific opportunity, it’s important to draw a clear line between investing and speculating, not just to classify assets, but to help us better understand our own motivations.

Investing is grounded in purpose. It’s a tool for helping people achieve long-term, meaningful outcomes, like retiring securely, supporting a family, or giving generously. It works hand in hand with financial planning because both are driven by time-tested principles: discipline, diversification, risk management and patience.

Speculating, by contrast, often comes from a different place. Sometimes it’s curiosity. Sometimes excitement. Other times it’s the emotional pull of big returns and bold stories, the feeling that if we don’t act now, we might miss something important.

None of these impulses are inherently wrong, they’re human. For clients who’ve built a strong foundation, there may even be room to explore speculative opportunities in a small, intentional way. Yet, it’s important to recognize that speculation and investing serve different purposes. One is meant to preserve and grow wealth. The other is a bet, one that can occasionally pay off, but just as often comes at a cost.

That distinction matters. Not to shame or discourage, but to help people stay aligned with their values, their goals and the strategies most likely to get them there.

Crypto Narratives: Separating Noise from Reality

With investing and speculating clearly distinguished, we often hear attempts to recast crypto enthusiasm in more rational terms. Investors eager to justify an allocation frequently point to familiar-sounding narratives: diversification benefits, inflation protection, blockchain as a revolutionary technology and validation through institutional adoption.

Before diving into these arguments, it’s important to recognize a key challenge: unlike traditional investments, cryptocurrencies do not possess intrinsic value. They do not generate cash flows, earnings, or dividends. Instead, their prices are driven primarily by supply and demand, speculation and sentiment. This fundamental difference means crypto behaves more like a speculative asset than a conventional investment, making many common narratives about its long-term benefits more tenuous when examined through a rigorous investment lens.

Each of these arguments borrows the language of investing, but when tested against the principles of sound portfolio construction, they fall apart. Let’s take a closer look.

Does Crypto Really Diversify a Portfolio?

A common defense of crypto in long-term portfolios is that it provides diversification, the idea that because its price movements differ from traditional assets like stocks and bonds, it can reduce overall portfolio risk.

However, diversification is only meaningful if it holds up when it matters most: during periods of market stress.

2020 COVID Crash: No Place to Hide

In early 2020, as the pandemic triggered a global selloff, Bitcoin fell nearly 50%, mirroring the drawdown in equities. Far from acting as a hedge, it amplified portfolio volatility at precisely the wrong moment.

2022 Bear Market: Same Pattern, New Cycle

In 2022, inflation and rate hikes led to a broad-based selloff. Once again, Bitcoin moved in lockstep with risk assets, not against them. It fell more, not less, during the decline.

These aren’t isolated cases, they’re real-world stress tests and the moments that matter most. They suggest that crypto behaves more like a high-octane tech stock than a true diversifier.

When diversification disappears in downturns, it’s not a feature, it’s a liability. That’s why we believe diversification should be demonstrated through data, not assumed through narratives.

Is Bitcoin an Inflation Hedge? The Data Says Otherwise

Another common narrative is that crypto, particularly Bitcoin, serves as a hedge against inflation and fiat currency debasement. It’s a compelling story on the surface: Bitcoin is finite, unlike the dollar. In a world of stimulus and central bank expansion, the logic goes, crypto should rise as traditional currencies lose value.

Yet again, the data doesn’t support the story.

The 2021–2022 Inflation Spike

Between 2021 and 2022, U.S. inflation reached its highest level in 40 years. If crypto were a reliable inflation hedge, we might expect its price to remain stable or rise during that time. Instead, Bitcoin lost over 60% of its value.

The problem isn’t that crypto failed to hedge against inflation, it’s that its behavior contradicted this objective entirely. Meanwhile, traditional inflation hedges like Treasury Inflation-Protected Securities (TIPS) held up much more effectively.

Crypto obviously has and may continue to rise in value, but that’s not the same as protecting wealth when purchasing power is under threat. For that, investors are better served by tools that are explicitly tied to real-world economic dynamics, not just digital scarcity.

Blockchain Technology vs. Crypto Investment: What’s the Difference?

Another common justification for owning crypto is the belief that blockchain, the underlying technology, will revolutionize everything from banking to supply chains to digital identity. It might, but even if blockchain transforms entire industries, that doesn’t automatically make crypto a sound investment.

Blockchain is a protocol, a way of storing and validating data across decentralized systems. While it has potential applications in finance, logistics and digital contracts, owning a cryptocurrency doesn’t give you a claim on those future use cases. Buying Bitcoin or Ethereum is not like buying equity in a company that builds on blockchain, there are no earnings, no dividends and no share of future productivity.

This distinction is crucial. Consider the late 1990s tech bubble: the internet was genuinely revolutionary and has reshaped society, but many investors suffered huge losses because expectations and valuations became wildly disconnected from the actual economic value created at the time. We don’t invest in “the internet” itself,  we invest in companies that successfully apply the technology to generate real profits.

Blockchain may be the breakthrough, but that doesn’t mean the tokens themselves are investments. That’s like confusing the road with the car, one enables the journey, but the other gets you there.

Understanding Institutional Crypto Adoption: Hype or Validation?

Another narrative used to justify crypto in long-term portfolios is the idea that institutional adoption signals legitimacy. If major asset managers, hedge funds, or trusted financial brands are entering the space, it must be a serious asset, right?

But institutional involvement often says more about demand than it does about long-term value.

Participation ≠ Conviction

Wall Street is remarkably responsive to trends, not because it believes in them, but because it can package and sell them. When client interest grows, product development follows, regardless of whether the asset in question fits within a prudent investment strategy. The launch of spot Bitcoin ETFs in early 2024 is a clear example: after years of regulatory hurdles, firms moved quickly to offer access once it became legal, not necessarily because it became wise. These products make it easier to trade Bitcoin, but they don’t change its fundamental characteristics.

It’s also worth noting how institutional investors are engaging with crypto. While headlines may highlight large firms entering the space, their exposure tends to be minimal. Most are allocating well under 1%, more as a speculative sleeve or volatility play than a core portfolio position. That level of caution tells us something important: even professional investors with vast resources and research teams are hesitant to treat crypto as a foundational asset.

We’ve seen similar behavior before. In the late 1990s, firms rolled out internet-themed funds and loaded portfolios with dot-com exposure, not always out of conviction, but because that’s where investor attention, and dollars, were flowing. To be clear: blockchain technology, like the internet before it, may well drive lasting change. But history shows that markets often get ahead of reality, in timing, pricing and impact.

Crypto may now be easier to buy through traditional channels, but ease of access is not the same as investment merit. Just because something is widely available doesn’t mean it belongs in a disciplined, goal-aligned financial plan.

A Clearer Lens for a Noisier World

Crypto has a way of pulling us in, not just with its technology or narratives, but with the sheer magnitude of its past returns. Strip that away, and we’re left with a simpler truth that gets lost in the noise: if not for the eye-popping gains, few would be advocating for its place in serious portfolios. It’s less about fundamentals, and more about FOMO and confirmation bias, the very behaviors we work so hard to protect our clients from.

The honest answer is: we don’t know where crypto prices are headed. They could go up, down, or even to zero. The good news is, we don’t need to know to help our clients be successful. A thoughtful, proven investment strategy, grounded in diversification, discipline, and long-term alignment with real goals, gives our clients everything they need to achieve financial independence.

That’s why the question isn’t whether crypto might have another run. It’s whether it offers any real improvement over a proven strategy.

Many of our clients have worked hard and invested intelligently. They’ve earned the right to speculate. If someone chooses to explore crypto with a small, separate slice of their net worth, fully understanding the risks, we appreciate their right to do so. But from a portfolio construction standpoint, we haven’t seen evidence that shows crypto strengthens, rather than weakens, the core of a long-term plan.

In a world that rewards noise and novelty, staying anchored to what works is more valuable than ever. Our job isn’t to chase trends, it’s to guide clients toward real, life-changing outcomes. That often means resisting the pull of what’s popular in favor of what’s proven.