Are cryptocurrencies an asset class? That depends on you. When you choose an investment portfolio, do you want to start with a category for these new currencies along with stocks, bonds and money market instruments?

This is not related to the question of whether or how much you should invest. You can call cryptocurrencies an asset class and assign zero or even negative portfolio weight to them. Or you can decide they’re not an asset class and still try to get positive or negative exposure to them via other asset classes.

There are two main reasons to have asset classes.

The first is that different classes have different uses. Stocks are used primarily for growth, bonds primarily for income and money-market instruments primarily for liquidity. For most investors, it makes sense to set portfolio-level targets for growth, income and liquidity before making individual asset decisions.¹

Some investors go beyond the big three classes. A popular addition is real assets — including real estate, commodities and inflation-protected bonds — to set portfolio-level inflation protection targets. Some investors add credit. But it’s equally rational to decide to get real asset exposure via hard-asset stocks and credit exposure in bonds. Calling something an asset class doesn’t change how much you invest in it, it changes how you allocate funds and track performance.

Do cryptocurrencies have a different use than traditional financial assets, meaning that investing in them is a portfolio-level decision? The answer is clearly “yes” for technophiles who participate in cryptocurrency development and use them for transactions. The answer is clearly “no” for people who buy them because the price has gone up recently, in the hopes of selling them when the price rises more;² also for people who are buying them for pure inflation protection.³

The rest of us have to decide if cryptocurrencies will support a nontraditional business sector that blurs the lines among investors, employees and customers; or if ideas like distributed ledgers are going to be incorporated into traditional businesses funded by stocks and bonds. Again, the question is not what you think about the likely level of success of cryptocurrencies and related technologies, but whether you think the value, if any, will be captured by traditional companies or holders of cryptoassets. You don’t have to know for sure. If you think there is a significant probability that a significant slice of future economic value will be represented by cryptoassets, it makes sense to think about your portfolio-level exposure to that event.