Video Lesson
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What Makes Crypto Different From Stocks
When you buy stock, you own a share of a business generating real earnings. Crypto derives value from network effects, scarcity, and expected future adoption — not underlying earnings or dividends. Bitcoin is primarily a digital store of value with a fixed supply of 21 million coins. Ethereum powers a global programmable financial system.
Understanding Crypto Volatility
Bitcoin has lost 70–80% of its value multiple times over its history — and recovered to new highs each time. This volatility is not a bug for speculators, but it is a serious risk for investors who cannot stomach or afford those drawdowns. Never invest money in crypto that you cannot afford to lose entirely.
Crypto's Role in a Diversified Portfolio
Crypto has historically shown low correlation with stocks, offering a potential diversification benefit in normal market conditions. However, correlations rise sharply during broad market stress events as investors sell everything liquid. Most advisors suggest keeping any crypto allocation to 1–5% of the portfolio.
How to Invest in Crypto Responsibly
- Start with Bitcoin and Ethereum — highest liquidity and longest track records
- Consider a Bitcoin ETF for simplicity and familiar tax treatment
- Use regulated, reputable exchanges with strong security
- Never hold more than you can afford to lose entirely
Key Takeaway
Crypto belongs in a portfolio only if you understand what you own, why you own it, and how much volatility you can handle. Keep the allocation small, stick to major assets, and let your overall investment strategy drive decisions — not market excitement.