Cryptocurrency Basics: A Concise Investor Guide (2025)

Cryptocurrency.

It’s a term that has been featured in more news headlines and social media discussions in the past five years.

With a collective market cap of around 3 trillion dollars and 560 million owners, cryptocurrency is also an increasingly intriguing option for investors.¹

In fact, cryptocurrency ownership by U.S. adults has increased from 15% to 28% in the past five years.²

With greater intrigue around cryptocurrency, we wanted to help curious investors understand:

• The basics of cryptocurrency (and how it works)
• The most popular cryptocurrency options
• The benefits and risks of cryptocurrency investment
• Regulatory updates to cryptocurrency
• Potential ways to invest

We hope this serves as an easy-to-understand guide that covers all the essential aspects of cryptocurrency.

What Is Cryptocurrency & How Does It Work? 

It can be very easy to overcomplicate cryptocurrency, so let’s break it down to the basics.

You can think of cryptocurrency as digital cash that only lives on the internet. It’s basically money that exists solely as computer code.

Unlike normal currency, this also means no government or banks print it. Without government or central bank control, numerous computers across the globe keep identical copies of the code records. You may have heard the term “decentralized,” which means no single individual or organization is in charge of cryptocurrency.

The term “crypto” essentially refers to cryptography (a strong type of math), which confirms that nobody can fake it or spend the same coin twice.

Here are some additional core concepts that are worth understanding:

• Blockchain: You can think of the blockchain like a massive Excel spreadsheet that the entire world can see, and nobody can secretly edit existing data. New cryptocurrency transactions get added as “blocks” and are locked forever once added. The new transactions get bundled into a block, which is then chained to other blocks. From there, the blockchain is built and continues to grow.
• Crypto wallet: Unlike your current wallet or purse that holds physical cash, your crypto wallet exists digitally. With your crypto wallet, you have two types of keys: public and private. A public key is akin to your bank account number, which you can give to anyone so they can send you money. A private key is almost like a PIN (or the key) to your crypto vault. Whoever has it can control the money. The crypto wallet, in essence, is just an app or device that safely stores your private key.

You may have heard the term “miners” and wondered how transactions work. There are two main consensus mechanisms: Proof-of-Work and Proof-of-Stake.

Proof-of-Work is most often associated with Bitcoin, where thousands of supercomputers race to solve an incredibly hard math puzzle. The first one to solve it gets to add the next block of transactions and wins newly created bitcoin as a reward. This “global lottery” happens every ten minutes.

Proof-of-Stake, often associated with Ethereum, involves people staking or “locking up” their Ethereum as collateral. The network randomly picks who gets to add the next block. People who lock up more coins get more chances, but cheating means you lose your staked coins. This approach uses significantly less energy than mining for Bitcoin.

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The Major Cryptocurrencies You Might Know

Now that we’ve covered the basics around cryptocurrency, let’s chat through some of the ones you may have heard about.

First and foremost, Bitcoin. This cryptocurrency was created in 2009 by someone (or a group) under the name Satoshi Nakamoto. Only 21 million Bitcoin will ever exist, and many people treat it like a means of wealth protection against inflation or currency crashes. In other words, digital gold. It makes up about 59% of the cryptocurrency market.

To help deepen one’s understanding of cryptocurrency, specifically the OG crypto, Bitcoin, think of Bitcoin like a digital/mythical land in a world with a fixed amount of land. 

Let’s do a thought experiment: Imagine a brand new world. No government, no real estate developers, no pop-up suburbs. Just a fixed amount of land (exactly 21 million plots, to be exact). No more can ever be created or duplicated. Now, envision that within this world, people like you and me start trading these plots for a variety of reasons:

• Some people buy because they think/hope others will want them later.
• Others buy because they believe this digital land will matter in the future.
• Some buy because they love that casino-floor energy.
• Others are just there to say, “I was early.”

This is why you might have heard that cryptocurrency is all about vibes. Even if you think this digital land is dumb, the scarcity associated with it isn’t. The fact that everyone can verify that no more land exists (nor will ever exist) gives crypto a baseline kind of value in the human psyche. Why? Humans love scarce things. 

I know I do. 

Diamonds. Taylor Swift tickets. “Limited-edition” pumpkin spice everything. Think of Bitcoin as the internet’s version of that.

You may be thinking to yourself, “Yeah, but crypto has no backing, no real value,” and you’d be right. There’s no government guaranteeing it and no physical goods tied to it. There’s no cash flow or income generation like some stocks and bonds. The value is essentially derived from institutions and people like you and me wondering if enough people agree that this scarce digital land is worth trading. So yes, that’s a fancy way of saying the world of cryptocurrency is primarily vibes-based.

However, there’s one crucial difference between assets like the dollar, gold, art, and Bitcoin. Bitcoin is the first asset where the scarcity is perfectly fixed, can be proven, and can’t be messed with by a central authority. The value of Bitcoin isn’t so much in what it’s made of, but in the fact that no one else can make any more of it.

Another cryptocurrency you’ve likely heard of is Ethereum (ETH). It’s known to power things like DeFi (decentralized finance), which allows for lending, borrowing, and earning interest without a bank.

You may have also heard of stablecoins. A stablecoin is a type of cryptocurrency designed to hold a steady value. It’s generally pegged 1-to-1 to a real-world asset like the U.S. dollar, euro, or gold. Think of it as digital cash that lives on the blockchain but doesn’t swing wildly like Bitcoin or Ethereum.

Of course, there are many other types of cryptocurrency beyond these.

Benefits vs. Risks – What Clients Must Understand 

Like any type of investment, cryptocurrency has both benefits and risks.

Benefits:

• Favorable historical returns: While historical performance is not indicative of future performance, Bitcoin has had an average return of around 200% per year since inception.³ Again, past performance is not a guarantee of future outcomes.
• Diversification: Crypto prices can move differently than stocks or bonds, so small exposure can potentially balance overall portfolio returns.
• Always open: Unlike the stock market, you can buy or sell cryptocurrency any day or time of year.

Risks:

• Volatility: The same asset that delivered 200% average annual returns has also experienced crashes of 85% (2018) and 75% (2022).
• Rule changes: Laws and tax rules can shift quickly and impact prices.
• Hacking and bankruptcy: Exchanges can get hacked or collapse (the most famous example being FTX in 2022). One major concern is the risk of cyber attacks and fraud. In 2024 alone, an estimated $2.2 billion worth of crypto was stolen in hacks, and hacking incidents have risen significantly over the past few years. The FBI’s 2024 Internet Crime Report recorded almost 150,000 complaints, $9.3 billion in losses, a 66% increase, and the largest affected group was age 60 and over, with over $2.8 billion in crypto-related losses. It’s also an interesting thought experiment to compare how crypto is currently operating (with its lack of regulation, the new Wild West) to the stock market before the Great Depression, when it was mostly unregulated as well.

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Regulatory Update: Where Things Stand in Late 2025

Like the rules we mentioned in the previous “risk” section, the United States has taken greater advancements in cryptocurrency regulation. 

Below, we wanted to expand on some of the latest pieces of legislation in 2025 and what to expect moving forward. 

In July 2025, the GENIUS Act was established which provided the first federal stablecoin framework. 

The current administration has also delivered the following commentary on cryptocurrency.

Only July 18th, President Trump stated, “I pledged that we would bring back American liberty and leadership and make the U.S. the crypto capital of the world... The Genius Act creates a clear and simple regulatory framework to establish and unleash the immense promise of dollar-backed stablecoins."⁴

In terms of what’s upcoming, there’s potentially additional regulation with bipartisan market-structure bills advancing in both House and Senate. We’ll likely see more conversation and potential legislation in 2026. Some of this legislation includes the Digital Asset Market Clarity Act (CLARITY Act) and the Senate Agriculture Committee Crypto Market Structure Draft. 

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Investing with Intention

As with any investment, careful consideration of the associated benefits and risks is paramount.

Owning actual bitcoin itself vs. owning an ETF

Owning the coin itself (Bitcoin, Ether, etc.) sounds more direct, but here’s why most institutional and wealth-managed investors often go the fund/ETF route instead of holding raw crypto:

• Compliance and custody: Owning coins equals custody risk. You are responsible for wallets, private keys, and security. If you lose the key? Poof, gone forever. Fidelity offers institutional custody that is fully insured, audited, and compliant with SEC/FINRA regulations. You get peace of mind and proper documentation.
• Simplicity in accounting & reporting: Holding direct crypto makes tax reporting a nightmare because you have to track cost basis for every transaction. ETFs report like any other security, they fit cleanly into your statements, Form 1099s, etc.
• Regulation & fiduciary duty: As a fiduciary advisor, recommending direct crypto could open me up to scrutiny and liability. ETFs and structured funds are regulator-friendly, meaning they’ve gone through the SEC gauntlet; i.e., they’re easier to justify to compliance and auditors.
• Liquidity & execution: Crypto exchanges can freeze, spreads can widen, or trades can fail. In contrast, ETFs trade on major exchanges with high liquidity and predictable execution.
• Estate, trust, and headaches: Passing down private keys in an estate plan is a huge pain. Funds like ETFs, on the other hand, are titled, transferable, and custodian-managed, simple for estate-planning purposes.

For institutions and the majority of high-net-worth clients in my experience, it’s usually not worth the operational chaos.

If you choose to invest, use regulated platforms (like Coinbase or Kraken) and fully understand the tax implications. Cryptocurrency has experienced volatility in 2025 and will likely continue to do so. It remains high-risk while maturing into a more legitimate asset class with growing regulatory backing.

All of the above information is purely educational. It may be a good idea to consult a financial advisor before investing in cryptocurrency.