Faith and Finances: Navigating the World of Cryptocurrencies (April 2025)
Over the last several years, cryptocurrency has seen a number of ups and downs in the market. Some investors have come away big winners from the crypto boom, but others have been less fortunate.
Lately, there has been a renewed interest in Bitcoin and other cryptocurrencies following Donald Trump’s reelection. In the run-up to the election and since, Trump has talked much more about cryptocurrency than he or other presidents have in the past. At a recent cryptocurrency conference, CNBC quoted him as saying, “The U.S. is going to do big things with crypto.”
It’s uncertain what exactly that could mean in the long term, but he has inferred that his administration will support cryptocurrency and that the government itself may buy and retain it. This apparent support has inspired a sudden spike in value since his election.
This has led to the obvious question any time we see a rapid increase in value: “Should I own this?”
As Bitcoin resurfaces in the news, you may have many questions. How does cryptocurrency work? Is Bitcoin a good investment? Let’s review some of the frequent questions we hear so you can be better equipped to make wise decisions about your finances.
What Is Cryptocurrency?
Cryptocurrency is a deregulated form of currency that uses blockchain technology to track, store, and trade digital assets. Rather than dealing in bills or coins, the value is stored entirely electronically. Unlike regular, or “fiat” currency, it is not tied to any central government or bank. In some ways, it behaves both like a currency and like a stock.
It is a currency in the sense of being a “store of value” and a means to purchase items and services. You can exchange dollars for cryptocurrency in the same way you might exchange dollars for euros or pounds sterling.
It also functions as an investment because its value can fluctuate with supply and demand. A dollar you spend on cryptocurrency could balloon in value or deflate to nothing, depending on how much currency people invest in.
In some markets, where the native currency’s value fluctuates a great deal due to factors such as inflation or political instability, cryptocurrency may provide a more dependable alternative for storing value. However, the U.S. dollar remains one of the most stable currencies on the market. So, for American investors, cryptocurrencies are a much more volatile and speculative type of investment.
One of the oldest and best-known forms of cryptocurrency is Bitcoin, but there are many other crypto “coins,” each with their own value fluctuations.
What Should You Be Aware of Before Investing in Bitcoin?
Before making any major financial decision, it’s important to understand what you’re investing in. The Bible reminds us to seek wisdom and counsel before making significant choices: “The prudent see danger and take refuge, but the simple keep going and pay the penalty.” (Proverbs 22:3 NIV).
Here are a few things to keep in mind as you explore crypto investing:
Volatility
The most important thing to remember is that cryptocurrency is a highly speculative market. It is not uncommon for the value of an investment to increase fifty percent in a short period. However, it is also not uncommon for the value of an investment to drop fifty percent, either.
We recommend only placing a small percentage of your wealth into highly speculative assets and maintaining a diversified portfolio. Keep in mind what Proverbs says about such investing: “Steady plodding brings prosperity; hasty speculation brings poverty” (Proverbs 21:5 TLB).
Deregulation
Part of the appeal of cryptocurrency is that it is deregulated, meaning it’s not attached to a specific government or entity. However, in order for a currency to be successful, there must be an element of trust. Not having the backing and regulation of a federal government can mean a lack of trust and, therefore, a lack of stability.
Prediction Challenges
Unlike most stocks, cryptocurrency is not tied to a particular corporation or product, so you can’t track probable changes by looking at an earnings report.
The value of cryptocurrency is determined entirely by supply and demand. The factors that cause the rise and fall of cryptocurrency are still largely unpredictable. This aligns with the wisdom in Ecclesiastes: “Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land” (Ecclesiastes 11:2 NIV). Diversification is key when the future is so uncertain.
Taxes
Currently, all crypto gains are taxed at the capital gains rate. As with all investments, if you own the investment for under a year, you pay regular income tax on gains. Sudden large capital gains can also affect state and medical benefits and other things attached to your income.
Regulations
Government regulations are still catching up to the crypto marketplace. Rules that affect your investment may change frequently and drastically. Staying up to date on changes is important, but politics are not always predictable.
Accessibility
While cryptocurrency is currency, it is still not spendable for most daily expenses. You will need to sell your coins to convert them to cash, and that conversion brings some added complexity. It is important to make sure you have cash on hand when it’s needed.
Scams and Unknown Cryptocurrencies
If you follow the financial news, you’ve no doubt seen stories popping up about investors losing everything to crypto scams. Scripture warns us to be wise and discerning: “The simple believe anything, but the prudent give thought to their steps” (Proverbs 14:15 NIV).
It may be wise to stay with currencies that are well-established and trusted, like Bitcoin, and to treat new coins like investing in a high-risk start-up.
When to Invest in Bitcoin
Before you consider investing in cryptocurrency, it is wise to have your financial house in order. “Put your outdoor work in order and get your fields ready; after that, build your house” (Proverbs 24:27 NIV).
Start by:
- Building an emergency fund for short-term needs.
- Managing debt wisely. “The borrower is servant to the lender” (Proverbs 22:7 NIV).
- Creating a retirement savings plan with 401(k) or IRA contributions.
- Having a plan for reaching your financial goals that is not wholly dependent on a sudden crypto boom.
Only invest discretionary funds—money you can afford to lose—because you do not want fluctuations in the cryptocurrency markets to keep you from purchasing a house or beginning retirement.
If you’ve taken these cautionary steps and still wish to invest, you have a few options:
- Cryptocurrency can be purchased directly through companies like Coinbase by opening an account online.
- You can store cryptocurrency offline in a “crypto wallet” which you can carry with you physically in a hard drive.
- The FCC has also approved a number of exchange-traded funds (ETFs) dealing specifically in crypto, allowing managers to trade cryptocurrencies for you.
Our guidance for crypto remains largely the same as for any highly speculative investment: only invest a small portion of your wealth, diversify, and invest according to your goals, not excitement about the newest trend.
A financial advisor can help you with these steps and gain a realistic view of your risk tolerance to build the investment plan that works best for you. You can look for an advisor who aligns with your Christian values at www.kingdomadvisors.com.
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