Definition
Digital assets recorded on decentralized blockchain networks rather than issued by a government or bank. Prices are set purely by supply and demand, which makes the asset class dramatically more volatile than stocks or bonds.
Why it matters
The practical questions are position sizing and taxes: crypto can lose half its value in months, and the IRS treats it as property, so selling or spending it at a gain is a taxable event.
Example
An investor caps crypto at 3% of a $100,000 portfolio: $3,000. A 50% crash costs $1,500, painful but only 1.5% of net worth. Selling the position later at a gain triggers capital gains tax like any other asset.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.