Updated: Dec. 23, 2021 astatine 7:08 a.m. ET

Christine Parlour

It’s hard to flight the hype surrounding cryptocurrency, from Elon Musk saying that “there’s a bully accidental that crypto is the aboriginal currency of Earth” to headlines similar this one, predicting that Bitcoin could deed $100,000 by 2023. Whether either of those things happens, oregon crypto takes a crook for the worse, remains to beryllium seen, but 1 happening is clear: There’s a batch of enactment happening astir cryptocurrency: Cryptocurrency outgo gateway Triple A estimates that arsenic of this year, determination are much than 300 cardinal crypto users worldwide and implicit 18,000 businesses that judge crypto payments. For their part, galore colleges and universities — similar Stanford, MIT, Duke, and UPenn — person been moving to get their pupil up to velocity connected this quick-moving satellite by steadily adding cryptocurrency courses to their curriculum.

So we asked Professor Christine A. Parlour, the Sylvan C. Coleman Chair astatine UC Berkeley’s Haas School of Business — who has taught courses connected investing for years and much precocious has begun introducing crypto into her program — what caller crypto investors should know. “Over time, arsenic cryptocurrencies person accrued successful importance, the contented of the FinTech MBA people has switched progressively to crypto,” she says.  Here are her thoughts:

  1. Don’t presume you’re investing successful a harmless abstraction …
    We are precise utilized to investing successful a harmless environment,” says Parlour. “Various regulatory agencies guarantee that accepted equity markets are transparent, and determination are circumstantial rules governing the trading process. This regulatory strategy is not afloat successful spot for crypto, either connected the firm broadside oregon connected the trading side. Everyone who participates should beryllium alert of this,” says Parlour. Indeed, arsenic MarketWatch precocious reported, though “in 2021, U.S. regulators made respective pushes for caller rules successful crypto …. uncertainties inactive remain, arsenic the marketplace ponders whether crypto lending products are securities, however stablecoins and decentralized concern should beryllium regulated, and whether the SEC volition o.k. a spot bitcoin ETF soon.”
  2. … And due to the fact that of that, beryllium careful. “Investors should beryllium precise cautious and marque definite that they cautiously bash their homework,” says Parlour. As MarketWatch Picks precocious reported experts disagree connected recommendations for however overmuch of your nest egg, if immoderate should beryllium successful crypto. Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management told america that: “We urge radical allocate 1% to 5% [of a portfolio to crypto]. It’s precise precocious risk, truthful it indispensable beryllium a semipermanent concern and radical request to look astatine it similar a tiny headdress tech stock.” And certified fiscal planner Brad Ledwith said you should look astatine it similar you’re a gambler walking into a casino. “A batch of radical locomotion into a casino and they fund however overmuch they are consenting to lose. Are you consenting to suffer 1-2% of your full portfolio? If so, that whitethorn beryllium a bully allocation, but it is each up to your gambling hazard tolerance. 
  3. Don’t bargain the hype connected each crypto innovation that comes out
    Parlour says it’s important to recognize however peculiar innovations adhd value. “By that, I mean that innovation for the involvement of innovation is not productive.”  Many of the concern models are caller and untested and “because of this, immoderate crypto-backed ventures volition fail,” says Parlour. That doesn’t mean determination aren’t large innovations, you conscionable person to cognize wherever to look. “There are immense benefits to everyone if we tin place inefficiency and physique a amended system,” says Parlour.

Alisa Wolfson is simply a personal-finance columnist for MarketWatch.