What are digital assets?

Recently, digital assets have gained legitimacy as part of certain diversified portfolio strategies, particularly for wealthy individuals seeking exposure to innovation, alternative stores of value, and long-term growth according to Wells Fargo Investment Institute.

What are digital assets?

Digital assets are items of value that can be securely owned, transferred, or traded over the internet. They can be digitized items of value, such as photos, a will, a loan, or money. Digital assets also can be digitized claims on physical things, such as oil paintings and homes. Other digital assets can be securely exchanged over the internet as a means of payment, person to person, without the need for banks or governments to mediate. Bitcoin is well known example, but there are many others. These assets are recorded on decentralized digital ledgers known as blockchains, which offer transparency, security, and efficiency in transaction processing.

Importantly, digital assets are not all the same. Some serve as mediums of exchange, others as investment vehicles, and still others as digital claims on tangible goods. This diversity is part of what makes the space so dynamic — and complex.

Why now? The investment rationale

Though it’s still in the initial stages of growth, the digital asset market is maturing. As of early 2025, the digital asset market capitalization is estimated to be exceeding $3.6 trillion.^Footnote1 Regulatory clarity has also improved, with some institutions now being allowed to custody digital assets and the Securities and Exchange Commission (SEC) approving ETFs tied to both futures and spot prices. These developments have laid the groundwork for broader institutional adoption and more robust market infrastructure.

For investors, digital assets may offer:

• Portfolio diversification: Their low correlation with traditional asset classes may help diversify risk exposure.
• Inflation hedging potential: Assets like Bitcoin are often viewed as an inflation hedge due to their limited supply and their decentralization from central banks.
• Exposure to innovation: From finance to real estate, blockchain technology is helping some industries evolve.

Timing the market: too early or too late?

Bitcoin’s meteoric rise — from fractions of a cent to tens of thousands of dollars — can make entry feel belated. However, Wells Fargo Investment Institute research suggests that digital assets are still in the early stages of adoption. This phase, often referred to as “hyper-adoption,” is characterized by rapid growth and increasing mainstream integration.

Navigating the risks

Digital assets are not without risk. Regulatory shifts, market volatility, cybersecurity concerns, and operational complexities require careful consideration. For wealthy investors, the keys are disciplined due diligence and professional guidance.

Wells Fargo Investment Institute classifies digital assets within the “real assets” category, aligning them with commodities and tangible investments. Bitcoin, for example, has been officially recognized as a commodity by U.S. regulators.^Footnote2

Strategic considerations for wealth portfolios

For those considering digital assets, the following principles may help guide allocation:

• Start with education: Understanding the underlying technology and market dynamics is essential.
• Consider indirect exposure: ETFs, trusts, and professionally managed funds can offer access without the complexities of direct custody.
• Align with long-term goals: Digital assets could complement core portfolio holdings, not replace them.

Consult with your advisor to determine how digital assets may fit into your broader wealth management strategy.