Cryptocurrency & Bitcoin: A Beginner’s FAQ

Cryptocurrency has continued to earn time in the spotlight recently as a growing yet unique asset.  It can also feel a bit mysterious and confusing, especially if you’re hearing about it for the first time.  This can lead to common questions such as: Is it an investment or an actual currency?  What exactly is cryptocurrency and bitcoin?  And, what is the blockchain?

To guide and educate you, we are providing a simplified, straightforward FAQ to help you understand what it is, why people talk about it, and what investors should know.

Q: What is cryptocurrency?

Cryptocurrency is a form of digital money. Unlike the dollars in your bank account, it isn’t issued by a government or central bank. Instead, it exists electronically and is secured by technology called blockchain, which records transactions in a transparent, decentralized way.

Q: What is Bitcoin?

Bitcoin is the first and most well-known cryptocurrency, launched in 2009. Think of it as “digital gold”—its supply is limited, and it’s designed to be used as a store of value or medium of exchange. Many other cryptocurrencies have been created since then, but Bitcoin remains the largest by market value and the one most investors recognize.

Q: How does blockchain work?

Blockchain is like a highly secure, transparent ledger. Imagine a checkbook that every participant in the system owns a copy of. When one person records a transaction, everyone else’s copy updates at the same time.

• Blocks: Transactions are grouped into “blocks.”
• Chain: Each block links to the one before it, creating a chain of records.
• Verification: Independent computers (called “nodes” or “miners”) verify each transaction.
• Immutability: Once a block is added, it cannot be altered without changing every single copy of the chain worldwide—a nearly impossible task.

This design removes the need for a central authority like a bank and provides a high level of trust and security.

Q: How does Bitcoin relate to inflation?

One of the reasons Bitcoin gained popularity is its built-in scarcity. Unlike traditional money, which central banks can print in unlimited amounts, Bitcoin has a hard cap of 21 million coins.

• Inflation hedge: Some investors view Bitcoin as “digital gold”—a way to protect against inflation, since its supply can’t be inflated away.
• Contrast with the dollar: If the government prints more dollars, each dollar becomes worth a bit less over time. Bitcoin, by design, resists this dilution.
• Reality check: While it has potential as an inflation hedge, Bitcoin’s price is also influenced by speculation and investor sentiment, so it doesn’t always move opposite inflation in the short term.

Q: Is cryptocurrency “real” if I can’t hold it in my hand?

Yes. While you can’t touch a Bitcoin the way you touch a dollar bill, it still has value because people trust the system and agree to exchange it, leading to demand for the asset. Most of our traditional money is already digital—when you swipe a debit card or make a bank transfer, no physical cash changes hands. Value doesn’t always mean something tangible.

Q: What makes cryptocurrency valuable?

• Scarcity – For Bitcoin, only 21 million coins will ever exist.
• Utility – Cryptocurrencies allow peer-to-peer transactions without intermediaries.
• Trust in the system – Blockchain technology ensures records are secure and verifiable.
• Market demand – Like stocks or gold, the value is driven by what buyers and sellers are willing to pay.

Q: How can I invest in Bitcoin?

There are two primary ways:

Direct Ownership
You can buy Bitcoin directly through a cryptocurrency exchange and store it in a digital wallet.

• + Pros: You own the actual Bitcoin, giving you the ability to spend it, transfer it, or hold it as long as you want.
• – Cons: You’re responsible for security. If you lose your private keys or wallet access, your Bitcoin may be unrecoverable. Exchanges can also be hacked if not properly regulated.

Bitcoin ETFs (Exchange-Traded Funds)
Recently, regulators approved several cryptocurrency ETFs for Bitcoin. These funds hold Bitcoin on behalf of investors and trade on stock exchanges, just like any other ETF.

• + Pros:
  • Easy access through a regular brokerage account.
  • No need to manage private keys or wallets.
  • Held in a regulated, custodian-backed structure that offers safeguards.
  • Fits naturally within an investment portfolio alongside stocks and bonds.
• – Cons:
  • You don’t actually “own” the Bitcoin—you own shares of a fund.
  • Expense ratios (fund fees) slightly reduce returns.
  • Less flexible if you want to use Bitcoin for transactions.

For most investors new to cryptocurrency, an ETF is often the safest, simplest way to gain exposure, and it also allows you to incorporate it into your existing diversified portfolio.

Q: Is cryptocurrency safe?

Cryptocurrency itself is secure thanks to blockchain technology. However, there are risks just like investing in any other type of asset. With crypto, risks come from how you invest and store it:

• Custodial accounts & ETFs: Generally safer and easier to use.
• Personal wallets: More control but require careful management of security keys.

Q: What are the risks I should know about?

• Price volatility – Prices can swing dramatically, similar to investing in the stock market.
• Regulatory changes/uncertainty – New regulations are now beginning to be established, but as this is still a fairly new asset, rules are still evolving.
• Technology risks – Losing wallet access can mean losing funds.
• Fraud/scams – Fake coins or platforms do exist, so careful vetting is critical.

Q: Should I invest in cryptocurrency?

There isn’t a one-size-fits-all answer. Some investors see it as a way to diversify and potentially capture high growth. Others avoid it due to volatility and uncertainty.

A common and more prudent way to start investing in cryptocurrency is through the use of an ETF where you can add it as a smaller, strategic allocation in your diversified portfolio. Cryptocurrency has shown to have diversification benefits. According to Morningstar data as of 6/30/2025, adding a small 1-3% allocation to Bitcoin in a 60% stock, 40% bond portfolio was shown to slightly increase risk-adjusted return, compared to investing in a 60/40 portfolio without it. Of course, it is critical to evaluate and understand the risks and benefits and the proper allocation to own in your portfolio if you consider doing so.

Q: What’s the bottom line?

Cryptocurrency and Bitcoin appear here to stay in some form. In fact, cryptocurrency currency already makes up 4% of the $100 trillion global equity market, making it a substantial part of the equity investment universe.

The key to understanding and potentially investing in this space is education, awareness, and ensuring any exposure fits within your broader financial plan and goals.

If you have any questions on cryptocurrency and/or how this may fit within your portfolio, please feel free to contact us.

Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC. Advisory services offered through Sanctuary Advisors, LLC., a SEC Registered Investment Advisor. Tenet Wealth Partners is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC.