Invest In Bitcoin For Retirement
Many people dream of a comfortable retirement, travelling, and being able to leave their grandchildren a legacy. In this article, we will consider cryptocurrency as an asset for long-term investment.
How to secure your pension using cryptocurrency?
The idea of retirement is changing quickly. People are no longer content with working for the same company for decades and then living on a modest pension. Many invest their money, so they can retire early and ensure their retirement funds are much more substantial. If you are up for this, you need to have a good understanding of how to get good returns, and why cryptocurrency as a type of investment is becoming popular.
Inflation is a silent killer
Bank savings accounts don’t work anymore. Interest rates around the world are approaching 0% as banks try to stimulate the economy. That means you earn almost nothing for placing money on deposit. It gets much worse than that. The financial crisis in 2008 and the coronavirus pandemic are only some of the events that make governments print more money than ever. 40% of US dollars in existence were printed in just 18 months in 2020/2021, which inevitably leads to inflation. Prices of goods and services will increase over time, effectively making your money decrease in value.
The combination of 0% interest rates and huge money printing means that the old retirement playbook no longer works. If you want to grow your wealth with compound interest over time, you need to invest in other assets. One asset that is immune to inflation is cryptocurrency.
Benefits of cryptocurrencies as an asset
Cryptocurrency has caught the attention of retirees because of its immense returns over the last few years. Investing $1,000 in Bitcoin in October 2016 would have got you a 1.57 BTC, which now amounts to almost $79,000. If you invested the same amount in Ethereum in 2016, it would now be worth about $300,000. These returns on investment are ridiculous. It’s why there are so many Bitcoin millionaires in the world. So, what is driving such insane growth in the value of cryptocurrencies? The first reason is the growth of the crypto market. It is expanding quickly, and those that invest early reap the rewards. Crypto still likely has a long way to go in this regard, as the technology has not made it to the mass adoption point yet.
However, there’s something else going on. Bitcoin and many other cryptocurrencies have a tightly controlled supply. There are only 21 million BTC that can ever exist. This is written into the Bitcoin protocol and will never be changed. Because of this limited supply, the coin is immune to inflation from money printing as we discussed earlier. In fact, Bitcoin is deflationary in nature, meaning when you hold it, prices will seem to deflate relatively to your currency. This is a great thing for you as an investor.
Another benefit of investing in cryptocurrency is that crypto assets are weakly correlated with other traditional assets. Price changes in the stock market or currency markets don’t automatically bring cryptocurrency prices with them. This means cryptocurrency is a great way to diversify your investment portfolio. It works as a defensive asset to hedge against crashes in other areas of the economy.
Your retirement plan
If you want to add digital assets to your retirement investment portfolio, you’ll need a plan to do it successfully. The first step is to get started. Cryptocurrency is still growing in value quickly, and the earlier you can get in, the better. The market may go up and down after you buy, but remember: this is a long-term investment. Try not to get too caught up in the ups and downs of the market.
If you’re new to cryptocurrency, you’ll also need to educate yourself. Investing in crypto is a little different from other assets. There are some technological and legal hurdles to overcome. These may be very easy or difficult, depending on where you live. You can follow many crypto influencers to learn more about cryptocurrency. Or, you can also take some of the many online courses to get familiar with specific cryptocurrencies.
The most important thing when investing for retirement is to diversify. When you’re going for the long term, anything can happen in the markets. Having all your eggs in one basket is a terrible idea when looking for good returns over decades. So, don’t put all of your pension in Bitcoin. This means diversifying beyond crypto (have traditional assets like stocks, gold, etc. in your portfolio) and also diversifying within crypto (having multiple cryptocurrencies in your crypto portfolio).
Risks of long-term investments in cryptocurrencies
Keep in mind that cryptocurrency is a risky asset. Many people have made a ton of money in cryptocurrency, but just as many have lost considerable sums of crypto, too. Cryptocurrency is volatile and can suddenly crash in value. This happened many times in the past. Cryptocurrency is also vulnerable to hacks and theft if you don’t look after it properly. Then, there’s a simple risk you might ‘lose’ your cryptocurrency by losing your “keys” (like your crypto password). If this happens, it’s gone forever. Many governments haven’t yet officially decided on the legal status of cryptocurrency, so the legal risk also exists. If you want to invest in crypto for retirement, you’re going to be a pioneer. No generation has done this before. The risks are real, but the rewards can be very large.
Cryptocurrencies on a retirement account
In some countries like the USA, you can already save cryptocurrency on your self-directed Individual Retirement Account (IRA). They work just like regular IRAs, except a self-directed IRA allows you to hold alternative asset classes like cryptocurrency and real estate.
One of the biggest advantages of having crypto as a retirement investment is the diversification of your portfolio. The more diverse it is, the more protected your account will be in case of any market downturns. With the crypto market growing in popularity each year, there is also a high chance that it will bring you large financial benefits if you invest in it now. Amongst the main disadvantage of having cryptocurrency as your retirement investment is its high price volatility. Take Bitcoin as an example: in December 2017, its price dropped to $14,000. Although the price increased and reached new heights in 2021, many might pick a more stable alternative to crypto.
Investing for retirement is getting trickier with time. Gone are the days when you can just leave your savings in a bank account and earn high interest from the bank. Now, inflation is silently eating away at the savings of those that aren’t aware of it. Cryptocurrencies are a new inflation-proof asset class that provides extremely high returns for long-term investors. Just be prepared for a wilder investment ride than other long-term assets.