The thing I keep coming back to when someone asks me how much of their net worth to put into crypto is that they are almost always answering the wrong question. They look at their brokerage balance, their coins, maybe a house, and they treat that pile as the whole picture. But for most people under fifty, the pile is not the whole picture. The largest asset they own is the stream of paychecks they have not collected yet. Economists call it human capital, and it dwarfs the portfolio for anyone who is more than a few years from retirement.
Once you put that asset on the balance sheet, the allocation math changes in a way that is uncomfortable for a lot of people who work in this industry, myself included. If you draw a salary from a crypto exchange, a token project, a mining operation, or even a public company whose stock trades like a crypto proxy, you are already carrying an enormous long position in the sector before you buy a single coin. The paycheck is the position. And it is a leveraged one, because you cannot easily sell it, hedge it, or diversify it.
Why your job is a hidden asset with a hidden beta
Think of your career as a bond that pays a coupon every two weeks. The present value of all those future coupons is your human capital. For a young software engineer it can easily be the single most valuable thing they will ever own, worth more than the house and the 401k combined. Nobody puts it on a spreadsheet because you cannot log into an account and see the number, but it is there, and it behaves like an asset with its own risk profile.
The risk profile is what matters here. A tenured professor has human capital that looks like a government bond, steady, and almost totally uncorrelated with markets. A commission salesperson at a startup has human capital that looks like a small-cap growth stock, high expected return, high variance. And someone paid by a crypto business has human capital that is correlated with the exact asset class they are thinking about buying more of. When the market goes into a long drawdown, their coins fall, their equity comp falls, their bonus evaporates, and in the worst case their job disappears. All four things happen at once, which is the textbook definition of concentrated risk.
Traditional finance handles this with a rule of thumb: the more bond-like your income, the more you can afford to hold in risky assets, because your paycheck is doing the job that bonds would otherwise do in your portfolio. The tenured professor can run heavy in equities. The person whose income already moves with the market has to pull the other way, because the diversification they thought they had is not there.
An adjustment framework you can actually run
I do not think you need a model with Greek letters to get this roughly right. You need two inputs, both of which you can estimate on the back of a napkin.
First, how stable is your income? Not your salary today, but your ability to keep earning something close to it through a bad year. A civil servant scores high. A freelancer whose clients are all in one industry scores low.
Second, how correlated is that income with crypto? This is the input people skip. Ask yourself what happens to your earning power in a two-year bear market where the total crypto market is down seventy percent and half the industry is laying off. If the honest answer is "I am fine, my employer sells toothpaste," your correlation is near zero. If the answer is "my company would probably not exist," your correlation is high and you should treat it that way.
Here is the workflow I actually use when a friend asks:
- Start from whatever crypto allocation cap you would set for someone with a stable, uncorrelated income. For a lot of people that lands somewhere in the ten to twenty percent of investable assets range, but pick your own number based on your risk tolerance and time horizon.
- If your income is unstable, cut that cap. Volatile earnings mean you may have to sell risky assets at the worst possible time to cover living costs, so you want less of them.
- If your income is correlated with crypto, cut it again, and cut harder. This is the step that catches people in the industry off guard. A crypto employee who would otherwise cap at fifteen percent might reasonably land in the low single digits on top of what their job already exposes them to.
- Count your equity comp, token grants, and vesting schedules as part of your crypto allocation, not as separate free money. They are the same bet.
That last point is where I have watched smart people go wrong. They hold a big unvested token grant, mentally file it under "upside," and then go buy more of the same beta with their cash savings because the portfolio spreadsheet does not show the grant. Come the drawdown, they discover they were running two hundred percent long the sector the whole time.
The failure mode nobody plans for
The classic blowup is not the person who buys too much crypto and watches it fall. That hurts, but it is survivable if the rest of the balance sheet holds. The real damage comes from correlation you did not price in. You lose the job and the coins in the same quarter, so now you are forced to sell the coins near the bottom to pay rent, locking in the loss precisely because your emergency fund was also crypto-shaped. The market recovers eighteen months later and you are not in it. That sequence has ended more crypto careers than any single bad trade.
The defense is boring and it works. Keep an emergency fund that is genuinely uncorrelated with your income, in cash or short-term government paper, sized to cover more months than you think you need if your paycheck and your industry go down together. For someone whose income tracks the sector, I would push that buffer longer than the standard advice, because your "lose the job" scenario and your "markets are down" scenario are the same scenario.
None of this means you should not own crypto. I clearly do, and I built a business around it. It means the size of the position you can responsibly take is a function of how you earn, not just how you feel about the asset. If you want to see the whole exposure in one place, the practical move is to track your coins, your equity comp, and your correlated income together rather than in separate mental buckets. A market scorecard or portfolio view, which is part of what we do at Blockcircle, makes the concentration obvious once you stop letting the paycheck hide off the balance sheet.
So before you set your allocation, price your paycheck. Figure out what it is worth, figure out what it is correlated to, and let that number set the cap. The coin you buy is the small decision. The one you already made when you took the job is the big one.