Cryptocurrencies don't always make sense. It may seem silly to buy digital coins that are traded on a very expensive global network of number-crunching computers. Legendary investor Warren Buffett doesn't see any real-world value in Bitcoin (BTC 0.20%) at all, because the darn thing doesn't actually make anything or provide a service. And besides all that, Bitcoin will likely never get back to the skyrocketing gains seen in the early years.
So I completely understand if you're skeptical about Bitcoin and other cryptocurrencies in 2025. But the times, they are a-changin'. You may want to set up a small Bitcoin stake as part of a larger, diversified investment portfolio, preferably before the end of the year. Here are three interconnected reasons why.
1. First and foremost: Regulatory progress
One of the biggest hurdles for cryptocurrencies has always been the murky legal landscape. Without a clear legal framework for buying, trading, and owning cryptocurrencies, large investors like billionaires and financial institutions are unlikely to enter this market. That's bad news for the Bitcoin community's ambition of becoming a digital version of wealth-storing gold.
Hold those thoughts; I'll get back to them in a minute.
But in 2025, there is finally some meaningful progress as governments and regulators clarify the rules for buying, selling, and holding Bitcoin. The Trump administration is not only exploring firm crypto rules, but also set up a Strategic Bitcoin Reserve and a United States Digital Asset Stockpile to manage cryptocurrencies under a federal banner.
This new transparency is helping to tame the wild west reputation of crypto and giving investors more confidence that they're operating on solid ground.
Image source: Getty Images.
2. Result: Bitcoin is becoming a better "digital gold"
Let's get back to the wealth-storage train of thought.
With the regulatory fog lifting, Bitcoin's original pitch as "digital gold" is starting to look a lot more credible. The asset will never have more than 21 million coins on the market, and 19.9 million of them have already been created. This fixed supply and Bitcoin's decentralized design have always made it attractive during periods of inflation or currency turmoil.
Now, with official recognition and improving oversight, it's easier to see Bitcoin as a legitimate long-term store of value -- one that isn't just for tech enthusiasts or risk-takers, but for anyone looking to diversify their portfolio.
For example, noted growth investor Cathie Wood noted that the Bitcoin supply is now growing slower than the amount of new physical gold mined each year. Therefore, Wood sees Bitcoin as a better inflation hedge than gold bullion, and suggests holding more Bitcoin than gold in a risk-hedged and diversified investment portfolio.
3. Last but not least: Clearer rules inspire large-scale investors
And that brings me back to the idea of large-scale investors motivating any asset's long-term price moves -- including Bitcoin's.
When the rules are clear, the big players feel more comfortable joining the game. In fact, they may have felt legally obliged to leave Bitcoin alone until the trading manual cleared up.
In 2025, that's exactly what's happening. Pension funds, insurance companies, and other institutional investors -- once worried about regulatory uncertainty -- are beginning to allocate capital to Bitcoin. The presence of Bitcoin-based exchange-traded funds (ETFs) makes a big difference, and the leading iShares Bitcoin Trust ETF (IBIT -1.07%) already has $85 billion of assets under management. That's a record-breaking growth story, just 19 months after the Securities and Exchange Commission (SEC) approved the first 11 spot Bitcoin ETFs.
The institutional investor participation boosts market stability and also signals growing mainstream acceptance. And that starts the tick-tock motion of a financial flywheel -- broader market acceptance drives Bitcoin prices higher, which throws more fuel on the digital asset's marketing fires.
So the pieces of the Bitcoin puzzle are coming together in 2025. I can't guarantee a smooth ride to the moon, but it looks like a sensible idea to include at least a little bit of Bitcoin in your long-term portfolio. Whether you buy the cryptocurrency directly or rely on ETFs like the easily available iShares fund, you don't have to go all-in.
Just a dab could do a lot of good, as long as the bullish Bitcoin trends I see today continue to play out. And I think starting to get in on Bitcoin before the calendar turns to 2026 is a good idea. Keep it small enough that you'll be just fine if Buffett's Bitcoin skepticism turns out to be more accurate than Wood's bullish view.
