Few investments have divided investors as sharply as cryptocurrency.

To some, it’s the future of finance and a once-in-a-generation opportunity to build wealth. To others, it’s a speculative asset that has yet to earn a place in a long-term retirement portfolio.

Now, Pennsylvania has added a new wrinkle to the debate.

The state recently began allowing families to invest in cryptocurrency through 529 college savings plans and ABLE accounts, giving digital assets a place in tax-advantaged savings vehicles for education and disability-related expenses. The move has prompted many investors to consider if cryptocurrency should also have a place in retirement portfolios.

Michael Godwin, chief investment officer at Fragasso Financial Advisors, believes the state’s new policy changes the conversation about crypto — but not necessarily the investment strategy.

In the latest installment of the Post-Gazette’s “In Conversation With” Q&A series, Godwin says he views cryptocurrency as a speculative investment rather than a true portfolio diversifier, and his firm does not buy or hold crypto in client accounts. He argues that investors can generally find better ways to pursue long-term growth while managing risk.

That doesn’t mean he believes every investor should avoid digital assets altogether. For those who want exposure, Godwin said cryptocurrency should represent no more than 5% of an overall portfolio — and is only for investors who understand the risks and have the stomach to endure wild price swings.

Q: Pennsylvania recently began allowing cryptocurrency investments within 529 college savings plans and ABLE accounts. Does that change the conversation about whether digital assets belong in a long-term investment portfolio?

A: I guess it changes the conversation a bit as investors are now able to invest crypto in those types of accounts. But I don’t view 529s necessarily as long-term investment portfolios particularly as allocations can change rapidly as kids get closer to college age.

Nevertheless, whether digital assets belong in an investment portfolio likely depends on an investor’s risk tolerance and their speculative nature.

Q: We’ve heard stories of investors making fortunes — or losing fortunes — in cryptocurrency. What’s your overall philosophy? Should the average investor own any crypto at all?

A: We don’t own or invest in cryptocurrencies in our client’s accounts. Bitcoin has pretty much become synonymous with cryptocurrencies, so I’ll use that regarding my talking points.

Bitcoin is now almost 20 years old and still there has been very little practical usage of the “currency.” How many people do you know that have made a transaction in bitcoin? I only know of two people. And I’m in this industry!

ChatGPT, on the other hand, is less than four years old and you’d be hard pressed to find anybody that hasn’t used the AI chatbot in one way or another.

To answer your question more directly — I think the average investor can find better alternatives for their portfolio than investing in crypto.

Q: If someone definitely wants cryptocurrency in their retirement portfolio, what percentage do you think is appropriate?

A: For those investors who desire holding some crypto, we recommend going up to 5% of their overall portfolio value. At 5% of your overall value, you’re getting enough exposure where strong returns can be meaningful. But if the asset has a severe correction, hopefully it won’t be catastrophic to your overall financial goals.

Q: Should younger investors think differently about cryptocurrency than someone who’s five or 10 years from retirement?

A: Younger investors generally have a longer investment horizon and greater ability to withstand the significant volatility that comes with cryptocurrency. Someone nearing retirement, however, has less time to recover from large market declines, and may be more focused on preserving wealth and generating reliable income.

That said, age alone shouldn’t determine whether someone invests in cryptocurrency.

Q: Bitcoin has gone through some dramatic booms and busts over the years. How should investors think about that volatility when planning for retirement decades into the future?

A: Crypto is more of a speculative asset, not necessarily a diversifying one. There’s nothing wrong with that. Many investors want to own some speculative assets in their portfolio in hopes that they can get a big return.

But with big booms can come a higher probability of big busts. So, invest accordingly.

If you invest $10,000 into bitcoin, you should be very comfortable with the prospect of losing at least half of your investment at some point. If that doesn’t sit well with you, either pare back the amount of investment or maybe diversify elsewhere.

Q: Some bitcoin supporters call it “digital gold.” Do you see it as an inflation hedge, serving a similar function as gold?

A: In the post-COVID era where inflation has been anything but low, bitcoin has been a rather poor inflation hedge. Shortly after COVID, when inflation went from 2% to 9%, bitcoin fell nearly 75% from its peak to trough, providing a very poor hedge to surging inflation.

Over that time, bitcoin has shown more correlation with certain tech stocks than gold. All in, we’d look at bitcoin as more of a speculative asset.

Q: If someone wants exposure to cryptocurrency, what’s the smartest way to buy it? Should they buy coins directly? Use ETFs? Or, invest through retirement accounts where those options are available?

A: The easiest way to do it is to simply buy an ETF. It’s simple. It’s professionally custodied. And it’s relatively cheap.

The one downside to owning it via ETF is that you can’t use the coins. So, if you wanted to buy a new car and pay with bitcoin you wouldn’t be able to do so. But like I said earlier, I don’t know of many people who are transacting with bitcoin.

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