Cryptocurrency and Your Financial Plan: What to Consider Before Investing
Featuring AJ Flores, CFP®
Cryptocurrency has become increasingly accessible, with digital assets now available through many investment platforms and financial apps. But easy access does not necessarily mean crypto is appropriate for every investor.
In a recent ABC30 Watching Your Wallet segment, AJ Flores, CFP®, Lead Financial Advisor at Portfolio Advisors Inc., discussed what investors should understand about cryptocurrency, including risk, taxes, and how digital assets may fit within a broader financial plan.
What Is Cryptocurrency?
Although cryptocurrency is often described as digital currency and stored in a “digital wallet,” it is important to understand how it is treated from a financial perspective.
“While it can feel like currency sitting in a wallet, especially given that they call it a digital wallet, it is considered technically a digital asset,” AJ explained.
Cryptocurrency can be purchased and held as an investment, sold later, or in some cases used to make purchases electronically. Unlike traditional government-issued currencies, cryptocurrencies generally operate without a central bank.
For investors, that distinction matters—particularly when it comes to taxes.
Understanding Cryptocurrency and Taxes
Buying and holding cryptocurrency does not necessarily create an immediate taxable event. However, tax considerations can arise when cryptocurrency is sold or used for a purchase after its value has changed.
AJ also discussed new cryptocurrency tax reporting requirements being phased in.
“There are new tax forms being phased in in 2026 by the IRS, so these accounts are intended to have 1099s,” he said.
One form investors may encounter is Form 1099-DA, which relates to reporting certain digital asset transactions.
The length of time an investor holds cryptocurrency can also affect the tax treatment of a gain.
“The IRS considers rules around them similar to capital gains rules,” AJ explained. “So what that means is if you’ve held the crypto for less than a year, it grows and then you use it to buy something, the taxable gain on that is ordinary income.”
Keeping accurate records of cryptocurrency transactions can therefore be an important part of tax planning.
Consider the Risk Before Investing in Crypto
Cryptocurrency prices can experience significant swings over relatively short periods of time. Before investing, it is important to consider how much volatility you are willing—and financially able—to accept.
Crypto values can be heavily influenced by supply, demand, and market sentiment, which can contribute to rapid price movements.
The question should not simply be whether cryptocurrency could increase in value. Investors should also consider how they would respond if the value declined significantly.
Would a major drop affect your retirement plans or another important financial goal? Would you feel pressure to sell? How much of your overall portfolio would be exposed?
Those questions can help put the potential return in the context of the risk involved.
Where Does Cryptocurrency Fit in Your Portfolio?
Before adding any new investment, it can be helpful to consider what role it is supposed to play.
Your investment strategy should reflect your financial goals, time horizon, cash flow needs, and overall comfort with risk. An investment that may be appropriate for one person’s financial situation may not make sense for another.
That same principle applies to cryptocurrency.
Rather than investing simply because an asset is popular or its price has recently increased, consider how it fits alongside your stocks, bonds, retirement accounts, cash reserves, and other investments.
Look at the Bigger Financial Picture
Cryptocurrency may be one piece of an investment portfolio, but it should not be considered in isolation from the rest of your financial life.
At Portfolio Advisors Inc., we believe investment decisions should begin with the bigger picture: What are you trying to accomplish, how much risk is appropriate, and does your investment strategy support those goals?
New investments and technologies will continue to emerge. Understanding what you own—and why you own it—can help you make more thoughtful decisions as markets and your financial life change.
If you have questions about your current investment strategy or how different assets may fit within your broader financial plan, AJ Flores, CFP®, and the Portfolio Advisors Inc. team are here to help.
