After a difficult 2022, cryptocurrencies are rallying -- along with the general market. In fact, Bitcoin (BTC 2.68%), the world's biggest cryptocurrency, has climbed about 80% this year. In more good news, asset management powerhouse BlackRock is showing confidence in the asset class.
Chief Executive Officer Larry Fink told Fox Business that Bitcoin may "revolutionize finance." The firm filed paperwork with regulators last month for a spot Bitcoin ETF. Let's take a closer look at what Fink had to say -- and consider whether cryptocurrency is a buy today.
Fink's evolving view of crypto
Fink generally has been known for his skepticism about cryptocurrency. Back in 2017, he referred to Bitcoin as an "index of money laundering."
But Fink's views of crypto have evolved since that time, becoming more and more positive. For example, in a 2022 letter to shareholders, Fink wrote: "BlackRock is studying digital currencies, stablecoins, and the underlying technologies to understand how they can help us serve our clients."
Fast-forward to today. In an interview with Fox Business, Fink said that as an international asset, Bitcoin could represent a hedge against inflation or problems happening in a particular country. "We do believe that if we can create more tokenization of assets and securities -- that's what Bitcoin is -- it could revolutionize finance," he said.
It's true that cryptocurrencies could transform finance -- and in more than one way. As Fink suggests, these international assets offer an investment alternative. They aren't linked to a specific economy. So they could provide a safe haven for investors if things aren't going particularly well in any given country.
Cryptocurrency may also be transformational when it comes to getting business done. These blockchains could make banking more accessible to people around the world, make payments more efficient, and help the metaverse take off. Much of this is already happening.
Of course, it's too early to say whether crypto truly will become mainstream -- it implies that a great deal of business and entertainment would depend on blockchain networks. But many of today's cryptocurrencies could have what it takes to make that a reality.
Ethereum and Solana
For example, decentralized applications running on Ethereum (ETH 2.98%) allow you to lend, borrow, invest, and even create and collect art. And crypto Solana's (SOL -2.76%) Solana Pay allows businesses to skip intermediaries -- and execute faster, cheaper payments.
So it's clear these and other crypto players could transform the way business is done. Does that mean you should invest in cryptocurrency right now? The answer depends on your investment style and comfort with risk.
If you have a diversified portfolio and you're comfortable with risk, crypto may be right for you. But since crypto is relatively new, we don't exactly know what the industry will look like five or 10 years from now. That's why you shouldn't invest more in this area than you can afford to lose.
Diversification can also lower your risk. For most investors, crypto should only be a small part of a diversified portfolio -- especially if you are a cautious investor -- and might include at least several kinds of cryptocurrencies.
Finally, if you're going to invest in cryptocurrency, pick those you believe can excel over time -- and invest for the long term. As with other assets, choosing quality and holding on is the best way to grow wealth.
If those points sound good to you, now could be a great time to add cryptocurrency to your portfolio. Though many players have climbed since the start of the year, they're still well off highs reached back in 2021.
Can they make it back to those levels and climb higher? Possibly. As Fink says, they have the potential to reshape finance. And if crypto does indeed do that, investors who buy today might win big over the long haul.