IRS Predicts Average Tax Refund for 2025
As of March, the IRS estimates that the typical tax refund for the 2025 filing season stands at $3,271, a significant amount that many taxpayers may receive once a year. In America’s round-the-clock consumer culture, individuals are presented with countless opportunities to spend this money on various appealing items.
Investing Tax Refunds Wisely
However, a considerable number of taxpayers choose to allocate their refunds more prudently, using the funds to reduce debt, establish an emergency savings account, or invest. The latter option is particularly intriguing, as a recent survey by the consumer research platform Attest indicates that approximately 25% of taxpayers intend to invest their refunds in cryptocurrency, with millennials showing the highest interest in converting their tax refunds into digital assets. But is investing in cryptocurrency a wise decision for millennials, or could it be beneficial for you as well?
Understanding Cryptocurrency Investments
Cryptocurrency represents a distinct class of assets, but when contemplating a purchase, the considerations are similar to any other investment. It should align with your risk tolerance, time frame, financial constraints, investment strategy, and objectives, as well as the prevailing market conditions. The SEC provides a list of general factors to consider before making any investment decision, and cryptocurrencies are no exception.
Distinct Advantages and Disadvantages of Crypto
While the initial evaluation of adding cryptocurrency to your investment portfolio mirrors that of other asset classes, digital currencies come with their own set of unique advantages and challenges.
Potential for High Returns
One of the most appealing aspects of cryptocurrencies is their potential for substantial returns. For instance, Bitcoin began trading in 2019 at around $3,800, and by early 2025, its price surged to over $90,000. Such remarkable gains are not exclusive to Bitcoin, as many other cryptocurrencies also present opportunities for significant profits that far exceed those typically available in stock, bond, or real estate markets.
Mainstream Acceptance of Cryptocurrency
Although cryptocurrency is still relatively young compared to traditional currencies, it has transitioned from niche investments to broader acceptance. An increasing number of digital coins are being used for practical purposes, more businesses now accept cryptocurrencies as payment, and several crypto exchanges are publicly traded. Additionally, some exchange-traded funds (ETFs) have started to include digital assets in their portfolios.
Accessibility of Cryptocurrency
With just a digital wallet and internet access, individuals can manage their cryptocurrency investments at any time, providing unparalleled convenience.
Volatility of Cryptocurrency Markets
However, extreme volatility is a hallmark of cryptocurrency markets. Prices can fluctuate dramatically, which may be overwhelming for many conventional investors. For perspective, recent tariff issues caused the stock market to drop significantly, with major indexes losing over 6% in a single day. In contrast, similar price movements in the crypto world could go unnoticed, as such fluctuations are quite common.
Regulatory Challenges
The regulatory landscape surrounding cryptocurrencies is still developing, often controversial, and subject to change based on geographic location.
Personal Responsibility for Security
Investors in cryptocurrencies must take personal responsibility for the security of their holdings, which are stored in specialized digital wallets. Losing the access keys can result in permanent loss of assets. Additionally, although cryptocurrencies can function as a medium for purchasing goods and services, the IRS classifies them as property, which subjects transactions to standard capital gains taxes.
