Can Cryptocurrency Be Part of a Diversified Long-Term Investment Portfolio?

It’s no secret that the crypto market is chock-full of high-risk investment opportunities. So, you might be wondering, can long-term buy-and-hold investors find solid investment choices within this space? In this segment of Backstage Pass, recorded on Nov. 10, Fool contributors Rachel Warren and Connor Allen discuss.

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Rachel Warren: The crypto market is hotter than ever. Ethereum recently hit a new all-time high while Bitcoin surged above $69,000 today, on the heels of news that inflation was at a 30-year high. Yahoo Finance recently reported that MicroStrategy CEO Michael Saylor has compared his early backing of Apple to that of Bitcoin, calling the crypto a dominant monetary network that everyone needs.

At in an interview at the New York Times DealBook conference, Apple’s CEO Tim Cook confirmed that owns cryptocurrency, and that Apple is looking into it, although there are no plans for the company to accept crypto as a form of payment or anything of that sort.

My question for you guys is, what is your general investment philosophy surrounding cryptocurrency, and do you think it can and should be part of a well-diversified, long-term investment portfolio? Connor, what are your thoughts on this?

Connor Allen: I think crypto can definitely be part of your portfolio, and I think in a lot of people’s case, and obviously it’s on a case-by-case basis, but it should be a part of your portfolio. It is one of mine.

The cool thing about Bitcoin specifically is that it’s the first asset class that I’ve seen that gains credibility with an increase in price. So you have stocks that typically, when they go up, people think, overvalue, overvalued, price-to-sales ratio is ridiculous, and yadda, yadda, yadda.

But when Bitcoin goes up, everyone’s like, “Oh, I got to buy some”, and that’s kind of the credibility that it gets is that people are believing in this thing. That’s where the value comes from. Which is a whole different conversation and really weird. But that’s something that’s really cool to me about Bitcoin specifically.

Overall, I am a believer in crypto, but I also do understand my shortcomings as an investor. One of those is not being able to understand everything about crypto. I understand the power of DeFi and the power that Bitcoin and other currencies could bring to the world. Like I get that.

I get the kind of the mission statement, I guess you could say, of crypto and what it could become. But with all the technicalities and everything else, I leave that up to other people because I really don’t understand that.

I just invest in four cryptos, those are Solana, Bitcoin, Ethereum, and Cardano. I don’t know which one will succeed or which one will fail. I just threw some money at four eggs in the basket, and that’s just a small portion of my overall portfolio.

Connor Allen owns shares of Apple, Bitcoin, Cardano, Ethereum, and Solana. Rachel Warren owns shares of Apple. The Motley Fool owns shares of and recommends Apple, Bitcoin, and Ethereum. The Motley Fool recommends MicroStrategy and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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