CDs vs. Crypto

CDs vs. Crypto

BankingCertificate of Deposits (CDs)

CDs and Crypto are two very different ways to invest

ByMatt Ryan Webber Full Bio

Matt Webber is an experienced personal finance writer, researcher, and editor. He has published widely on personal finance, marketing, and the impact of technology on contemporary arts and culture.

Learn about our editorial policiesPublished May 19, 2022Fact checked byTimothy Li Fact checked byTimothy LiFull BioTimothy Li is a consultant, accountant, and finance manager with an MBA from USC and over 15 years of corporate finance experience. Timothy has helped provide CEOs and CFOs with deep-dive analytics, providing beautiful stories behind the numbers, graphs, and financial models.Learn about our editorial policies

If you have some savings that you’d like to invest, you have a very wide range of options open to you. Some types of investing are high risk, but can offer high returns. Others are relatively safe, but you won’t see great returns. Certificates of Deposit (CDs) and crypto represent the extreme ends of this spectrum.

Crypto investing is very high risk, but can offer spectacular returns if you get lucky. In contrast, CDs are considered one of the safest investments around, because you are guaranteed a set return on your money. The downside is that this return will be less than most other forms of investing.

Both CDs and crypto can be valuable, effective investments, but in order to get the best out of them you need to understand how they work, and the risks involved. In this guide, we’ll take you through what you need to know.

CDs vs. Crypto: The Key Differences

The key differences between CDs and crypto can be understood by reviewing the definition of each type of investment.

CDs are a low-risk, low-return option. When you take out a certificate of deposit, you agree to leave your money in one place for a set period of time. In exchange, your bank or credit union will pay you a set interest rate on this money; one that is typically higher than other types of savings account. The downside is that your money isn’t liquid – you have to leave it in the CD for the whole term you’ve agreed to, or you’ll have to pay hefty penalties.

Crypto, in contrast, is a high-risk, high-return option. Cryptocurrency is digital money based on blockchain technology, and today there are thousands of cryptocurrencies available to invest it. You can buy many of these through a cryptocurrency exchange, which may offer a large selection of currencies to choose from. Your options range from the most established digital currencies like Ethereum and Bitcoin to virtually unknown coins that are newly released in an initial coin offering (ICO).

CDs vs. Crypto

These fundamental characteristics make each type of investment suitable for a different purpose. If you have some savings that you will need within a few years (perhaps to buy a house or a new car), and want to earn a predictable but not spectacular return in the meantime, a CD is a good choice. You really shouldn’t put any money you might need into crypto, because the market is so volatile. You might see a great return on your investment, or you might lose it all.

Let’s look at these differences in more detail.


The most important difference between CDs and crypto is the risk involved with each form of investment.

CDs are considered one of the safest investments available. This is because the bank (or other financial institution) agrees to pay you a set return on your money, irrespective of whether they actually make a profit. In other words, the risk is all on the bank. Any money you put into a CD is also federally insured, so even if the institution which holds it goes bankrupt, the first $250,000 of your money is completely safe.

Crypto is the opposite end of the spectrum when it comes to risk. The prices of cryptocurrencies, even the most established cryptocurrencies, are much more volatile than the prices of other assets like stocks. Cryptocurrencies are subject to wild price fluctuations that can all but wipe out the value of your assets within a few weeks, only to bounce back a year later. This makes crypto a very poor choice for conservative investors, or anyone who may need to access their money in an emergency.

Ideal Length of Investment

For most investments, there is an intimate relationship between investment risk and the amount of time you expect to hold the investment. This is because investors who have the luxury of time can wait out short-term market fluctuations. Though the price of individual assets may vary considerably, if the market as a whole increases in value, and you hold a well-diversified portfolio, you will see returns in the long term.

This does not apply, however, to either CDs or crypto. CDs are designed primarily for short- to medium-term investors (that is, for those looking to invest their money for one to five years). The guaranteed return offered by CDs is useful over this period because stock market fluctuations could reduce the value of the same money if it was invested in stocks.

The ideal length of time to hold an investment in crypto is much less clear. That’s because crypto hasn’t been around long enough for analysts to be able to make long-term predictions about the market. No one knows whether the price of well-established cryptocurrencies like Bitcoin will continue to rise, and the future of the market could also be affected by regulatory changes. There is the possibility, to take an extreme example, that cryptocurrency becomes illegal and therefore worthless.

Make sure you understand the early withdrawal penalties that apply to your CD account. If you need to access your money in an emergency, you could have to pay hefty fees.


So what are the advantages of investing in crypto, rather than CDs?

Well, one is flexibility. CDs are safe, but they are also very inflexible. You have to leave your money in the CD for the term you’ve agreed to (unless you have a liquid CD or no-penalty CD or some other exotic type). Otherwise, you’ll probably have to pay significant early withdrawal penalties that could wipe out your returns.

In contrast, cryptocurrencies are very flexible. You canbuy cryptocurrency with as little as $2 in your local currency. You can then buy and sell your crypto holdings as often as you like, though some currencies charge transaction fees that can make doing so expensive. If you need to pull your money out of crypto in an emergency, you can do so, but the volatility of the market means you should be prepared to make a loss.


The second major advantage of investing in crypto – at least according to crypto enthusiasts – are the high returns that some investors have enjoyed. The volatility of the crypto market means that your investments can rapidly increase in value, and if you sell them at the right moment you can make a large profit. However, the risk associated with this strategy is so high that you shouldn’t put any money you are likely to need into crypto.

CDs, on the other hand, offer fairly low returns. This is especially true at the moment, when federal interest rates are so low. Because the bank guarantees that they will pay you a particular interest rate on your CD, they don’t want to make this too high. If they do, and they can’t generate that level of return by investing your money in other ways, they will lose money. If you take out a CD, you’ll typically get a higher return than with a savings account, but not much higher.

Is a CD or Crypto a Better Investment?

It depends on a variety of factors, and your risk tolerance above all. CDs are a very safe form of investment. Investing in crypto, in contrast, is a high-risk strategy. If you are definitely going to need the money you are investing, you should choose a low-risk strategy like a CD.

Are CDs or Crypto Safer?

CDs, by far. Even well-established cryptocurrencies are subject to wild price fluctuations, and you could lose a good proportion of your investment. CDs offer a guaranteed return, and the money you put in them is insured by the federal government.

Are CDs a Good Long-Term Investment?

Not really, but crypto might not be either. CDs are good for short- to medium-term investing. Over the long term, you are likely to earn better returns by putting your money into stock or other assets. That might also hold true for cryptocurrencies, but at the moment we simply don’t have enough long-term data to be able to tell.

The Bottom Line

Certificates of Deposit (CDs) and cryptocurrencies represent two very different types of investment. CDs are low-risk, low-return financial products that are good for saving for short- to medium-term goals and earning a modest return in the meantime. Crypto, on the other hand, is a highly volatile market. Crypto investing can offer high returns and a great deal of flexibility, but comes with the risk of losing your money.

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