Amid recent volatility in the cryptocurrency market, U.S. Sen. Elizabeth Warren is sounding the alarm regarding the asset’s instability and how it might affect retirement accounts.

The representative wrote a letter to Securities and Exchange Commission chair Paul Atkin asking how the agency will protect investors after President Donald Trump signed an executive order in August that opened the door for 401(k) plans to offer investments in alternative assets, including crypto like bitcoin.

“For most Americans, their 401(k) represents a lifeline to retirement security rather than a playground for financial risk,” Warren wrote on Jan. 12. “Allowing crypto into American retirement accounts creates fertile ground for workers and families to lose big.”

The value of bitcoin, for example, had enormous gains in 2025, reaching an all-time high of more than $126,000 in October. But by the time Warren had written her letter, it tumbled to around $90,000, and as of Feb. 8, it had fallen further to around $70,000.

Warren’s comments reignite the ongoing debate over whether such wild swinging investments belong in retirement plans. Proponents emphasize the significant profit potential of cryptocurrencies and their role as diversifiers in portfolios. Critics, on the other hand, view them as boom-or-bust investments whose inclusion in 401(k)s could exacerbate the retirement crisis, leaving many people unable to retire and increasing the burden on the state.

Cryptocurrencies are increasingly moving into the mainstream and capturing the population’s attention. As we approach the potentially widespread adoption of crypto in employer-sponsored plans, here’s what investors may want to think about first.

Warren isn’t alone in her worries about adding crypto to retirement plans. While experts may be split on the wisdom of including crypto in portfolios, many acknowledge the risks that comes with its volatility.

“The objective for the average person is to have a safe, secure retirement plan,” Jerry Schlichter, a lawyer whose firm has experience in 401(k) cases, told CNBC (1). “When you talk about new areas like cryptocurrency or private equity, these are fraught with danger for investors for a variety of reasons.”

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According to iShares, between 2015 and 2024, bitcoin outperformed major asset classes, including the S&P 500, gold and the Dow Jones Emerging Markets Index, by a wide margin eight of those 10 years (2). But it was also firmly the worst-performing asset in the other two years. When bitcoin prices rise, the gains can be significant; when they fall, the losses can be severe.

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Despite its volatility, the first thing many proponents of crypto point out is its earning potential. From 2015 to 2025, bitcoin’s price increased by more than 22,000%, far outpacing the S&P 500’s roughly 440% rise, according to CNBC.

“Look back at the past 10 years, and it’s the best-performing major asset class,” Amy Arnott, a portfolio strategist for Morningstar, told AARP (3). “But there is still that question mark: is it just a speculative asset, or will it have long-term staying power?”

Supporters also argue that crypto reduces risk in portfolios by acting as a diversifier.

“[Cryptocurrency] could be an alternative store of value if there are declines in stocks and bonds, much like how people have used gold in their portfolios in the past,” Jay Jacobs, BlackRock’s U.S. head of equity ETFs, told AARP.

If crypto ends up being available as part of your 401(k) plan and you’re wondering whether or not to invest in it, consider the following.

Do your research: Don’t invest in cryptocurrency just because of its eye-popping headline numbers. Past returns don’t predict future gains, especially with volatile assets. Before committing any money, take the time to understand what these assets do and to assess their long-term prospects and risks using objective, credible sources. If you’re still convinced, focus on the option you believe offers the best balance of price and potential.

Know what you’re getting into: Make sure you’re comfortable with the level of risk that comes with crypto. It may be beneficial if you have time on your side and are willing to weather the downturns in moments your investment loses value. Keep in mind that if a severe market sell-off occurs around your planned retirement date, you may need to delay withdrawals or adjust your strategy accordingly.

Keep allocation small: No retirement plan should rely on a single investment. In other words: don’t put all your eggs in one basket. Experts champion diversification, including a mix of assets that perform differently under various market conditions. This means balancing high-growth, volatile investments with more stable options or ones that investors historically turn to during uncertain times. Some financial professionals suggest limiting cryptocurrency exposure to 5% of your portfolio or less.

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CNBC (1); iShares (2); AARP (3)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.