5 Reasons People May Buy Cryptocurrencies

Not long ago, cryptocurrencies were a niche asset class that only attracted a select group of investors with a high risk tolerance. In fact, just 2% of U.S. adults owned cryptocurrency in 2018. However, with the asset class maturing and gaining traction among institutional investors, ownership had climbed to 14% by mid-2025, according to Gallup polls.

For many investors, crypto has become more than just a speculative investment. It's now often considered a way to diversify portfolios, hedge against monetary inflation, or gain exposure to a growing alternative payment system.

Knowing why people are drawn to cryptocurrencies may help investors better assess the role these assets could play in their portfolios. Let's walk through five common reasons people may buy cryptocurrencies.

Some investors buy cryptocurrencies to diversify their portfolios. The idea is that digital assets may perform differently than traditional holdings because their prices are often driven by unique factors like adoption trends or regulatory developments. Because diversification may potentially reduce overall portfolio risk and volatility, crypto has gained a spot in many investors' portfolios in recent years.

Institutional investors are particularly intrigued by digital assets' potential diversification benefits. A 2025 survey from EY found that 57% of institutional investors were interested in investing in crypto to drive diversification.

However, it's important to note that the correlation between cryptocurrencies and other risk assets such as stocks has increased over time, especially during periods of market stress. That means digital assets may not always provide the buffer investors expect. And diversification does not ensure a profit or protect against losses in declining markets. For investors looking to diversify using crypto, it's critical to evaluate how the asset class's volatility and speculative nature align with their broader investment goals.

During periods of monetary inflation, investors often look for assets that might hold their value as the purchasing power of cash declines. Historically, gold has been one of the most common ways investors have hedged against currency devaluation, but lately, more investors are looking to cryptocurrencies to fulfill this role.

Bitcoin, for example, is now commonly referred to as "digital gold." Unlike the U.S. dollar and other government-issued currencies, bitcoin's supply is capped at 21 million coins, leading some investors to believe it could hold its value as central banks increase the money supply.

The current evidence for bitcoin's hedging power is limited, however. The cryptocurrency has both soared and fallen during periods of elevated inflation. Nonetheless, some investors still view bitcoin, ethereum, and other cryptocurrencies as long-term stores of wealth that will help protect their purchasing power.

Some investors opt to buy crypto because the currencies operate on blockchain networks that aren't controlled by governments or central banks. The appeal of decentralized networks can be particularly strong when confidence in governments or financial institutions has been shaken due to high inflation, financial crises, or political instability.

Some investors also view crypto as a way to prevent banks from debanking them by closing their accounts or preventing them from conducting transactions. For investors worried about the risk of debanking, decentralized crypto networks offer an alternative where transactions are validated by a broad group of market participants rather than centralized institutions or authorities.

That being said, decentralized crypto markets can be volatile and may still be impacted by fiscal or monetary policies. While decentralization is a draw for many crypto investors, it can't guarantee stability or protection, and a lack of central authorities often means fewer guardrails and bailouts when things go wrong.

Some investors are drawn to cryptocurrencies simply because they expect further price increases. Between January 2020 and December 2025, the price of the largest cryptocurrency, bitcoin, surged more than 1100%, and the total market capitalization of all cryptocurrencies jumped from around to $200 billion to more than $3 trillion, according to CoinMarketCap.com. The fear of missing out, or FOMO, on the next bull market can be a powerful draw for many. However, the potential for sizeable returns also comes with significant risk. Cryptocurrencies are volatile, and investors should understand that losses can accumulate just as quickly as gains.

Still, some traders view cryptocurrencies' large price fluctuations as a potential opportunity. Unlike traditional asset classes that often trade mainly on earnings, cash flows, or economic fundamentals, crypto prices can move sharply based purely on changes in sentiment. Short-term traders often look to capitalize on these market movements.

Many investors cite the institutional adoption of cryptocurrencies as one key reason to invest. With a number of asset managers, publicly traded companies, and even some governments investing in crypto over recent years, the belief is that a new wave of mainstream adoption of the asset class will lead to further price increases. Roughly 55% of hedge funds owned some form of crypto-related asset in the first six months of 2025, according to a survey of 122 investors and fund managers by the Alternative Investment Management Association (AIMA).

Institutional purchases of crypto have also helped legitimize it in the eyes of many investors who once feared it was too speculative or unregulated. It's important to note, however, that institutional adoption of cryptocurrencies cannot assure future returns or stability for investors. It should likely be viewed more as a trend to monitor, rather than a reason to assume there is lower risk involved.

Cryptocurrencies can potentially offer unique opportunities, and investors are drawn to them for different reasons. However, like any investment, the asset class comes with risks. Investors should consider increased volatility, reduced regulatory protections, transaction fees, and security concerns before making an investment, and of course, ensure their investments align with their risk tolerance and broader financial goals.