‘My retirement is completely in bitcoin’: After bitcoin crashed 50%, holders face risks. What this downturn reveals

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The dangers of betting your future on crypto

The risks of leverage are front and center in a recent MarketWatch analysis, which highlights how some highly enthusiastic investors have borrowed billions against their crypto holdings.

“My retirement is completely in bitcoin,” one investor explained (5). She invested in Strategy, a bitcoin treasury company, and also borrowed against bitcoin using Firefish, “a noncustodial peer-to-peer lending platform, which puts your bitcoin into escrow. (5)”

When prices fall sharply, that kind of strategy can backfire fast. Borrowers may face margin calls or forced liquidations, potentially locking in losses at the worst possible time. For investors who lack other assets or income to fall back on, a market downturn can spiral into financial catastrophe.

Hold or sell? There’s no one-size-fits-all answer

For bitcoin holders trying to decide what to do next, there’s no universal right move.

Whether holding or selling makes sense depends on how crypto fits into your broader financial plan, how much volatility you can tolerate and whether you can afford to lose the money invested.

Unlike stocks or bonds, bitcoin doesn’t generate income. Returns depend entirely on price appreciation, which can be sudden and brutal.

Many financial advisors suggest limiting crypto exposure to roughly 1% to 5% of a diversified portfolio, and only for investors with strong financial foundations and a high tolerance for risk, according to guidance noted by CNBC (1).

Selling during a steep downturn can lock in losses, but continuing to hold also carries risk, especially for investors who are overexposed or relying on crypto for future income. Rather than reacting to short-term price swings, experts often encourage investors to reassess whether their crypto holdings still align with their long-term financial goals, risk tolerance and overall portfolio balance.

How some investors attempt to reduce crypto-related risks

For those who decide to maintain or initiate crypto exposure, focus on caution rather than enthusiasm.

Investors can gain exposure by buying bitcoin directly through crypto exchanges, purchasing spot bitcoin ETFs through traditional brokerages or investing in crypto-related stocks.

These approaches differ in risk, oversight and complexity. Spot bitcoin ETFs, for example, allow investors to gain exposure through regulated brokerage accounts, avoiding the need to manage private keys or use offshore platforms. Crypto-related stocks may add another layer of separation from direct price swings, though they still carry crypto-linked risk. Buying bitcoin directly can offer the most control, but also places full responsibility for security, storage and loss prevention on the investor.

Regardless of the method a person invests, safety matters. Avoid memecoins, which are often linked to fraud or hype-driven crashes, never invest money you can’t afford to lose and remember that crypto should not replace emergency savings, stocks or bonds.

For investors tempted to concentrate their savings in bitcoin or borrow against their holdings, the latest crash is a reminder that extreme volatility can pose serious risks to long-term financial security, particularly when crypto exposure crowds out more stable assets.