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Crypto isn’t just a trend. It’s rewriting the rules of finance. Wall Street, major banks, and governments are all taking notice. And today, it’s showing up in real policies, regulations, and financial products.
And for you, it could mean new ways to invest, diversify, and potentially grow your wealth. In this video, we’re going to walk you through exactly what crypto is, the different types, why it can have big price swings, and how to actually use it in a portfolio.
Now there are plenty of myths about crypto, which isn’t surprising for something relatively new. And even beyond the myths, many people hesitate simply because crypto just feels so complex. Security questions also come up quite a bit, which only add to the uncertainty.
That’s exactly why it helps to begin with the basics, Because once you understand what crypto is and how it works, the rest starts to become much clearer. So let’s get into it. Cryptocurrency is a type of currency that exists online and not in physical form like bills or coins.
With traditional money, a bank keeps an official record of your balance and transactions. With crypto, there isn’t one central institution keeping those records. Instead, a decentralized network of computers around the world verifies and tracks transactions on a digital ledger called a blockchain.
Think of a blockchain as a shared digital record book that thousands of computers help maintain, except once something is added, it’s designed to be extremely difficult to change or delete. These records are grouped together into pages, called blocks, and each block links to the one before it, forming a chain.
Here’s the simple takeaway: instead of a bank keeping track of the ledger, it’s a network of computers. That structure is what makes crypto transparent and resistant to tampering because it's available for anyone to see.
Two of the most well-known cryptocurrencies are Bitcoin and Ethereum. So, let’s dive into how they work, starting with Bitcoin. If you’re talking about the currency, it’s bitcoin with a lowercase b, but if you’re talking about the network, it’s Bitcoin with an uppercase B.
The Bitcoin network is designed to let people transfer value directly to one another. It was the first cryptocurrency ever created and is still the largest and most well-known in the crypto space. Some unique elements of cryptocurrencies like Bitcoin are their transparency, always-on access, and the lack of a single controlling authority to approve or process transactions.
But Bitcoin stands out because of its very limited supply. Only 21 million bitcoin will ever exist. Why? Bitcoin’s code has a built-in limit that caps the total supply. And that fixed supply is what helps drive demand, and why many people view Bitcoin as a long-term investment. Another well-known cryptocurrency is Ethereum. Unlike Bitcoin, Ethereum is a blockchain network designed to run programmable applications called smart contracts.
These are self-executing agreements written in code that can move assets or enforce contract terms automatically when conditions are met, without a bank or middleman to approve it. The native cryptocurrency used on the Ethereum network is called Ether, or ETH. ETH is used to make payments and cover the fees required to run smart contracts and interact with applications on the network.
Essentially powering everything that happens on Ethereum. Now all that might sound complicated, but it’s designed to work simply like in this example. Imagine you’re buying something from an online marketplace built on Ethereum. Rather than trusting the marketplace or a person to hold your payment, a smart contract can do so automatically. It locks the funds, verifies delivery conditions using external data, and releases the payment or issues a refund - all according to predefined rules.
Both bitcoin and Ethereum have experienced price swings over the years, and we’ll get into those reasons in a little bit. But that kind of volatility is what led to the creation of another type of cryptocurrency, stablecoins. Unlike Bitcoin and Ethereum, stablecoins are designed to maintain a stable price. And that price is tied, or pegged to something more stable, like the US dollar for example.
And because of this, stablecoins can be easier to use for everyday transactions. On many blockchains, transfers can settle within minutes, even outside of bank hours. So, behind the scenes, movement of funds can be faster than traditional payment systems. Plus, since stablecoins aim to mirror the value of the asset they're tied to, they tend to be much less volatile than other cryptocurrencies.
So, now let’s talk about why cryptocurrencies can have significant price swings. While crypto can be used as digital money, most people buy it as an investment, hoping it will grow in value over time.
But since crypto is still relatively new, investors don’t always agree on how to value it, and that can lead to sharp price moves. News and sentiment can also play a role. Headlines, influencer posts, or updates about major companies adopting or abandoning crypto can move prices quickly.
And when confidence shifts, and a lot of people rush to buy or sell, there aren’t always enough trades to smooth things out, making price swings even sharper. And because crypto continues to trade even when traditional markets are closed, price reactions can happen immediately whether overnight or over the weekend. So now that you know a little bit more about crypto, I’m going to hand it off to our investment professional Stephanie to explain how to actually invest in it.
So, one way to invest in crypto is to buy it directly. This means you are purchasing assets like bitcoin, Eth, stablecoins, and other cryptocurrencies through a crypto exchange or investment platform.
When you buy directly, also known as buying spot crypto, you fully own your crypto and can trade or move it at any time. Now to hold your crypto, you can either keep it in a wallet you control yourself or rely on a third-party to hold it for you.
To be clear, your wallet doesn’t store the crypto itself, it stores your private keys. And those keys prove you actually own the crypto and let you use or move it on the blockchain. While this gives you full control, you’re also 100% responsible for keeping track of your wallet and those keys, or you may lose access to your crypto.
But when you use a third‑party provider, like Fidelity Digital Assets, or another regulated provider, they handle the technical side of securing your crypto, including secure storage and protection against unauthorized access.
Now beyond managing keys, another thing to consider when buying crypto directly is that crypto holdings aren’t protected by FDIC or SIPC insurance or any other government agency and are not backed by any bank. So, if something goes wrong, there’s no built-in safety net to get your money back. That’s why it’s so important to use a secure and reputable exchange when you’re buying or storing crypto.
Ok, so one way to invest in crypto, without buying it directly, is through exchange traded products, or ETPs. You can think of these products like a wrapper around crypto. Instead of buying bitcoin or Eth directly, you buy a spot crypto ETP, something designed to closely follow the price of a digital asset.
Take a look at this chart. A bitcoin exchange-traded product (ETP) seeks to track Bitcoin’s price. So, when Bitcoin’s price goes up, down or sideways, the ETP is intended to reflect those same movements. It can offer exposure to bitcoin without requiring you to buy, store, or manage cryptocurrency directly, and you can hold it in a brokerage account or some retirement accounts, like an IRA.
You can also get exposure to crypto by putting money into companies that power the crypto ecosystem, like payment platforms or Blockchain technology providers. Instead of picking a single coin, you’re spreading your investments across companies you believe will benefit as the crypto industry grows.
One potential advantage of this approach is diversification. It lets you gain exposure to crypto’s overall performance without relying on a single asset. And since these investments are typically traded through traditional brokerages, they often come with commission-free stock trading.
That said, this approach isn’t risk-free. Since crypto stocks can be very volatile, something like a bad earnings report, negative news about crypto, or a downturn in the industry can cause stock prices to drop quickly.
Finally, one of the latest ways to invest in crypto is through a crypto IRA, which allows you to hold actual cryptocurrency inside a tax-advantaged account. The main perk? Tax treatment. In this hypothetical chart, all three accounts grow at the exact same rate—the only difference is taxes.
The bottom line shows a taxable account. Because you’re paying taxes along the way, less of your growth gets to compound. The middle line represents a tax‑deferred IRA. By postponing taxes, you end up with significantly more. And the top line represents a tax‑free IRA, where avoiding taxes altogether allows your investment to compound the most over time.
But there are drawbacks. Not all crypto IRAs offer the same protections, and just like regular IRAs, losses inside the account generally can’t be used to offset taxable gains. Another thing to keep in mind…this money is meant for retirement so if crypto takes a major downturn at the wrong time, it could impact your timeline if your holdings fall sharply when you need the money.
So those are the basics of crypto. But that’s just the beginning. If you want to learn more about how crypto works, Fidelity has some great resources at Fidelity.com/LearnCrypto. So, make sure to check that out.
Till next time, investors.