Can You Count On Cryptocurrency For Retirement?

Are you considering adding cryptocurrency to your retirement portfolio? Is it reliable enough of an investment? Here is everything that you need to know.

You’ve probably heard the many stories of investors who are making millions of dollars from Bitcoin investments. According to Investors, if you had purchased just a $100 worth of Bitcoin in 2011, it would have been worth over $2 million today.  This teenager has amassed almost a half of a million in Bitcoin and other cryptocurrencies. He started with an investment of just $12,000.

If you are like most Americans, you probably don’t have enough saved for retirement. Maybe you got a late start on investing and are wondering if you can create your own windfall from Cryptocurrency investments.

Cryptocurrencies are a whole new class of assets. They represent some of the fastest growing and newest asset classes available. But, are they reliable enough for a retirement portfolio? Many investment professionals think so.

What Is Cryptocurrency?

A cryptocurrency is a form of digital currency. Some people believe that it is the currency of the future. Cryptocurrency is difficult to counterfeit because it uses cryptography for security. Bitcoin is the most popular type of cryptocurrency today. It has a market cap of more than $116 billion, according to Inc.

There are a variety of new and emerging types of cryptocurrency, including stablecoins, which are a lot less volatile than Bitcoins hence the name. Lightning Bitcoin is another type of cryptocurrency that has low transaction fees and fast transactions. Another example is Ethereum, which is used for projects that are crowdsourced.

Benefits Of Adding Cryptocurrency To Your Retirement Portfolio

Here are some of the benefits of adding cryptocurrency to your retirement investment strategy.

There Is Long-Term Growth

Although cryptocurrency is highly volatile at the moment, it looks like it might prove to be a good long-term investment. Most investments that are volatile can still be very good long-term investments, as long as you are willing to hold on for the long haul. A good example is most stocks. Many are highly volatile but good for long-term growth. Cryptocurrency is the same. Most people plan for retirement over decades. As long as you are in it for the long-haul, cryptocurrency can be a good investment.

It Adds Diversification

Most investors know that diversification is a great strategy for minimizing risk while still allowing long-term growth. Most investment professionals recommend diversifying your retirement portfolio into mutual bonds, stocks, real estate, and other assets. Exciting new assets like cryptocurrency can be a great way to diversify your portfolio. As long as you rebalance your portfolio every so often, your portfolio should continue to grow.

A Government Hedge

Cryptocurrency isn’t directly controlled by the government. This fact is what makes it such an attractive investment. Government policies can strongly impact Wall Street. Since cryptocurrency isn’t directly impacted by changes in government policy, it can move in the opposite direction of current markets, kind of similar to gold in that respect. This makes it very attractive for long-term retirement investing.

It’s Cheap

Financial gurus who are against Bitcoin argue that it is too great of a risk for a retirement account. As of May of this year, Bitcoin was selling for just over $7,000. This number represents the maximum risk. Now is the time to buy cryptocurrency while it is still relatively cheap.

Cryptocurrency is Resilient

Cryptocurrency is proving to be resilient. It had quite a tumultuous beginning. In spite of all of the ups and downs, it has not entered a death spiral as some financial experts predicted. Bitcoin has just turned ten years old and is now a hundred billion dollar market.

The Technology Is There

The future of cryptocurrency depends on having the technology to make it functional. Investors must be able to seamlessly and easily trade coins. They must also be able to exchange coins for other assets.

Experts believe that the technology needed to support cryptocurrency trading will increase in coming years. In fact, much of the technology is already there. More and more retirement platforms are allowing cryptocurrency trading. It is already becoming a lot more accessible.

The Bottom Line

Only you can decide whether or not Bitcoin as a smart investment idea. You should talk to your accountant or financial advisor for specific advice. The important thing to keep in mind is that the IRS relies upon taxpayers to track and pay taxes on cryptocurrencies. Therefore you should talk with your CPA or tax accountant for advice. Check out this blog post to learn the differences between a tax accountant vs CPA.

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References:

1. https://www.investopedia.com/articles/investing/123015/if-you-had-purchased-100-bitcoins-2011.asp
2. https://www.forbes.com/sites/forbesfinancecouncil/2018/06/27/three-reasons-cryptocurrency-is-making-its-way-into-retirement-plans/#5d5f3810104e
3. https://www.daveramsey.com/blog/what-is-bitcoin
4. https://www.cnbc.com/2018/10/31/bitcoin-turns-10-years-old.html