The essentials
- A share is a claim on a business; most crypto-assets have no earnings or cash flows behind them.
- Crypto trades 24/7 on many exchanges with varying levels of regulation.
- Price swings are far larger than for shares, and losses of 70% or more have happened repeatedly.
What you would actually own
A share gives you a slice of a company's profits and assets. Bitcoin, ether and most other crypto-assets give you a unit recorded on a blockchain. Their value depends on what others will pay, which in turn depends on adoption, network use, supply rules and sentiment. There are no dividends, earnings or balance sheets to anchor a valuation in the usual sense.
Types of crypto-asset
- Bitcoin: the first and largest, with a capped supply. See what is Bitcoin.
- Platform tokens: such as ether, used to pay for activity on their networks.
- Stablecoins: tokens designed to track a currency, such as USDT.
- Other tokens: thousands of projects, many of which have failed or become worthless.
How it differs from investing in shares
| Shares | Crypto-assets | |
|---|---|---|
| Underlying value | Company profits and assets | Demand for the asset itself |
| Where it trades | Regulated exchanges | Crypto exchanges, regulation varies |
| If the platform fails | Client assets ring-fenced by law | Customers have often waited years or lost funds |
| Typical yearly swings | Tens of percent in bad years | Falls of 70% or more have occurred |
Custody
With shares, a regulated broker holds them for you. With crypto you choose between leaving coins on an exchange, which exposes you to its security and solvency, or holding your own keys in a wallet, where losing the recovery phrase means losing the coins.
Crypto in a long-term portfolio
Some investors hold a small amount as a speculative position alongside a diversified core; many avoid it entirely. Regulators in several countries warn that people should be prepared to lose all the money they put into crypto-assets. Any holding should be sized with that possibility in mind.
See also how to spot trading scams, many of which involve crypto.
Reader questions
Are there crypto ETFs?
In some countries exchange-traded products hold bitcoin or other crypto-assets. Availability and rules differ by country, and they carry the same price risk as the underlying asset.
Is crypto a hedge against inflation?
It has been described that way, but its price has often fallen in periods of high inflation and rising interest rates. The evidence is limited and mixed.