Things to know before you invest in Bitcoin or Ethereum

Investors these days, be it seasoned institutions to curious first-time participants, ask this one question: ‘Should I invest in Bitcoin or Ethereum? The short answer is yes, but with the right context. These two assets dominate the digital economy, together accounting for nearly two-thirds of the global crypto market cap. Yet, they are fundamentally different in purpose, risk, and long-term value creation. For anyone considering their first step into digital assets, here are the key principles that matter most.

1. Bitcoin, Ethereum play distinct roles

Bitcoin, launched in 2009. It was the first successful decentralised digital currency. It is designed on scarcity, that means only 21 million coins will ever exist. This fixed supply makes it similar to gold, and so it is called “digital gold.” For many, it is a hedge against inflation and a way to diversify beyond traditional currencies.

On the other hand, Ethereum was introduced in 2015, and is fundamentally built differently. While it also has a native currency (ETH) like Bitcoin, its primary purpose is to enable smart contracts and decentralised applications (dApps). Developers use Ethereum to build platforms like Uniswap (a decentralised exchange) and OpenSea (an NFT marketplace). This positions Ethereum as the backbone of the decentralised internet.

2. Volatility

Price fluctuations are inherent to all asset classes, but cryptocurrencies experience them more sharply. Bitcoin, for instance, climbed to an all-time high of $69,000 in late 2021, dropped below $20,000 in 2022, and later surpassed $113,000 in 2025. Ethereum mirrored this pattern, rising to nearly $4,800 before falling to around $900, and has since staged a strong recovery.

For investors, this volatility is both a risk and an opportunity. Those who entered during downturns often benefited significantly over the long run, but short-term investors who entered at market peaks faced steep losses. 

3. Regulations

Policy developments are central to the growth of Bitcoin and Ethereum. Clear regulations provide confidence to institutional investors, while uncertainty tends to limit participation.

In the United States, the approval of spot Bitcoin ETFs in 2024 allowed pension funds, family offices, and retail investors to access Bitcoin through regulated products.

In India, which leads the world in grassroots adoption for three consecutive years (2023–2025), regulations remain evolving. A 30% flat tax on gains and no provision to offset losses make investing less favorable compared to equities.

These policy environments are not just background noise they directly affect returns, liquidity, and access. 

4. Make them part of a diversified portfolio

One of the most common mistakes new investors make is concentrating too heavily in crypto. While Bitcoin and Ethereum dominate the sector, they should be seen as part of a balanced investment strategy.

Adding 2–5% exposure to crypto or Bitcoin improves overall portfolio performance without significantly increasing risk. Beyond this range, volatility can overwhelm diversification benefits.

5. Use a long-term lens

Bitcoin has now existed for over 15 years, surviving multiple crashes and proving its resilience. Ethereum, meanwhile, has evolved significantly most notably with its transition to Proof-of-Stake (Ethereum 2.0), which reduced energy usage by nearly 99.9% and introduced staking rewards averaging 3–6% annually.

Long-term investors who held through cycles have historically been rewarded. Glassnode data shows that the number of Bitcoin wallets holding coins for more than two years is at record highs, reflecting strong conviction in its future value.

Closing perspective

Bitcoin and Ethereum are being integrated into traditional finance, with giant banks getting into this space. Yet, they are not without risks. They remain volatile, regulation is evolving, and custody requires vigilance.