This top tech investor says 'the big crash' in cryptocurrencies in inevitable and cautions those going 'all-in'

fred wilson REUTERS/Lucas Jackson

Cryptocurrencies like bitcoin and ether have unleashed an investor frenzy — and a chorus of warnings that a speculative bubble is about to burst.

The latest warning comes from Fred Wilson, a venture capitalist and co-founder of Union Square Ventures.

His advice: diversify your bitcoin assets before it's too late.

"I am certain the big crash will happen. I don’t know when it will happen and I think it may be some time before it does," Wilson writes in a post on his blog on Sunday.

Unlike some crypto skeptics, Wilson is a believer in the new blockchain-based currencies. But he also has the wisdom of personal experience, and he believes some bitcoin bulls may be blind to the risk they're facing.

Wilson lost 90% of his worth during the dot com bubble and crash of 2000. The 10% he retained came from two major real estate investments, which eventually became the entirety of his net-worth.

"We were not diversified. We had all of our money in venture capital and internet stocks and had ridden that wave all the way up," he wrote. "Had we not sold Yahoo! and other stocks to purchase the real estate and pay the taxes on the gains, we would have been wiped out completely."

While the US economy still appears to be on stable ground, Bitcoin is already on the decline from a wild summer. The cryptocurrency kept many investors on the edge of their seats, as the price shot up dramatically between March and June, before reaching an all-time high of $4,765 on September 1.

For some, cryptocurrencies have been a life-altering investment. (Just ask this house full of Millennial bitcoin millionaires.) But to Wilson, that's all the more reason to move that money into other stocks and assets.

The ideal portfolio, he says, is a mix of cash assets like money market funds, blue chip stocks like Amazon and Google, real estate, and a "risk bucket" with things like venture capital investments and crypto. While Wilson said he only has about 5% in crypto, he would recommend an investment 10% to 20% of one's network "for people who are young or who are true believers."

"It is fine to be a true believer and being all in on crypto has made [some investors] a lot of money," Wilson writes. "But preservation of capital is about diversification and I think and hope that they will take some money off the table, pay the taxes, and invest it elsewhere."