Cryptocurrency is one of the hottest investments of the last couple of years, and many investors have scrambled to get involved.

Institutional investors have also joined in the crypto craze. In fact, Fidelity Investments recently announced that it will start allowing 401(k) investors to contribute a portion of their savings toward digital assets, including Bitcoin (BTC 0.99%).

This is a major moment for crypto, as Fidelity is the first major 401(k) provider to include cryptocurrency as an investment option. Does this mean you should allocate some of your savings toward Bitcoin? Maybe -- or maybe not.

Digital Bitcoin symbol.

Image source: Getty Images.

The case for investing in Bitcoin

The biggest reason to consider investing in Bitcoin is that if it explodes in value over time, you could potentially make a lot of money.

Currently, Bitcoin is priced at roughly $39,000 per token. Its all-time high was just under $70,000 per token back in November, and some investors believe it could be headed much higher -- possibly up to $1 million within the next decade.

Of course, nobody can say for sure where Bitcoin will go. The cryptocurrency does have some unique advantages, but it's not perfect. If it does end up doubling or even tripling in value, however, investing even a small amount now could be a smart move.

Why it may be best to avoid it for now

Despite being a potentially lucrative investment, Bitcoin is also incredibly risky. All cryptocurrencies are still speculative right now, which makes them a different breed of investment.

Unlike stocks, crypto has only been around for a little over a decade. It doesn't have a long history of growth over time, and nobody knows whether it will even exist years from now. Even the experts are divided over its potential, with some predicting it will soar in value, while others believe it will drop to zero eventually.

Even if crypto does thrive over time, it will likely experience high levels of volatility in the short term. In fact, Bitcoin has lost over 80% of its value on multiple occasions over the last decade. If you're anywhere near retirement, that level of turbulence may be hard to stomach.

In fact, the U.S. Department of Labor recently issued a statement cautioning against investing 401(k) funds in cryptocurrency. The agency advised fiduciaries considering offering crypto as an investment offering to "exercise extreme care," citing that cryptocurrency may be too risky for retirement savings.

Should you invest in crypto right now?

Whether or not you should allocate a portion of your retirement savings toward Bitcoin will depend on your age and tolerance for risk.

If you're nearing retirement age, it may be best to avoid crypto altogether. Because it's so risky and volatile, it could spell trouble for your retirement if it crashes. Similarly, if you're a risk-averse investor, Bitcoin's wild ups and downs could make it a stressful investment.

On the other hand, if you have cash to spare and are willing to take a gamble, you may choose to invest a small amount in Bitcoin. There's always a chance you could lose your investment, but you could also see substantial gains if Bitcoin succeeds. If you're willing to take that chance, it may be the right investment for you.

Just be sure, though, that you're only investing money you can realistically afford to lose. Also, it's important that the rest of your portfolio is well-diversified so that if Bitcoin fails, the majority of your money will stay safe.

Bitcoin can potentially be a smart investment, but it's not right for everyone. If you choose to invest, make sure you understand both the advantages and disadvantages. And if you decide Bitcoin isn't the right option for you, there are plenty of other investments out there that could be a better fit.