Cryptocurrency.

In plain English

A cryptocurrency is a digital asset whose ownership records live on a blockchain: a public, distributed database secured by cryptography that does not depend on a central bank or company to verify transactions. Bitcoin (created in 2009) is the original and largest, with a market cap typically in the hundreds of billions. Thousands of other cryptocurrencies (Ethereum, Solana, and many others) exist with varying purposes, volume, and credibility. Cryptocurrencies are highly volatile, lightly regulated compared to securities, and treated as property (not currency) by the IRS for tax purposes.

01Why it matters

Crypto sits in a category of its own: not a stock, not a bond, not a commodity, with a price history that mostly tracks risk appetite and speculative flows rather than underlying cash flows. For an allocation to make sense in a long-term portfolio, an investor needs both a thesis for why it should appreciate over decades and the tolerance to watch 70% drawdowns without panic.

02The math, step by step

Bitcoin reached about $69,000 in November 2021, fell to about $16,000 by November 2022 (a 77% drawdown), then recovered above $100,000 by late 2024. A $10,000 investment at the 2021 peak would have been worth $2,300 a year later. A $10,000 investment from the 2022 trough would have been worth about $60,000 two years later. The same asset, opposite stories.

03What this is NOT