Newer Investors Favor Crypto Over ETFs—Here’s Why Experts Warn Against It

It’s no secret that crypto is winning the popularity contest among first-time investors. For many, hopping onto Coinbase is easier than wading through mutual fund prospectuses. Social media amplifies crypto’s “rebellious” ethos, a place to escape Wall Street, and maybe strike it rich overnight. 

Fidelity’s 2025 State of the American Investor Study found that 43% of new investors, those with zero to five years of experience, were likely to own crypto (compared with 16% of those with 11 or more years of experience), while less than half of that group (19%) had invested in ETFs.

“Crypto feels like the lottery ticket their parents never had,” Ben Kurland, CEO at DYOR, told Investopedia. “It’s global, always on, and comes with the chance of life-changing upside that almost no ETF can match.” 

Why Crypto Has the Hype

Platforms like Coinbase make it straightforward to get started in crypto, and the sense of community on Reddit and other social media can sway even cautious minds. There’s a sense that anyone can get in on the next big thing, bypassing traditional finance’s gatekeepers.

According to the Fidelity study, many newer investors admit that their investment choices are heavily influenced by online influencers, sometimes leading to significant mistakes. One-third of new investors report that social media is their primary source for making investment decisions. Additionally, around half of this subset of new investors reported regretting their choices because they had lost money or made poor investments.

How Do ETFs Compare?

Most mainstream ETFs act as a basket that holds pieces of many different companies. When you buy shares in an ETF, you’re spreading your money across all those businesses. If one company has a bad day, the others help balance it out.

The most popular ETFs, which track the S&P 500, have historically yielded an average annual return of about 10%. They come with fewer price fluctuations and a cushion against catastrophic losses. While these ETFs can’t promise the moonshot gains of a cryptocurrency, steady gains accumulate over time. “ETFs may be boring, but they offer diversification, transparency, and long-term compounding that crypto simply can’t guarantee,” Kurland said.

ETFs aren’t risk-free, fees can eat into earnings, and tracking errors may occur, but the likelihood of losing everything overnight is much lower than with direct crypto ownership. You can also see exactly what companies your ETF owns, check its performance history, and sell your shares anytime the market’s open. “The danger is that crypto’s volatility can be brutal, and many first-timers underestimate how quickly a position can swing 30% or 40% in days (or sometimes hours),” Kurland said. “Unlike ETFs, there are no built-in guardrails or regulatory safety nets because, if you lose your keys or get caught in a scam, there’s no recourse.”

The Bottom Line

Crypto is fueling a new wave of retail investors, with many often opting for direct crypto ownership over shares of ETFs and other traditional investments. But newer investors don’t have to pick sides. You can use ETFs as your financial foundation—a steadier way to build real wealth over time. If you want some crypto exposure, don’t go all in. “Think of crypto as your venture bet, not your retirement plan,” Kurland said.