Is Crypto Viable for Retirement Investing?

It’s never too early to plan for the future, and financial security after retirement is something that the majority of workers strive towards. The large number of pension plans and investment opportunities can seem daunting to many consumers, and the development of modern financial products has added to the list. 

Knowing which crypto to invest in is the toughest challenge, but expert advice and providers offering the latest crypto signals to consumers can help. Crypto signals are alerts from service providers for cryptocurrency investment opportunities based on set criteria. 

While there are no guarantees when it comes to investments, using state-of-the-art trading bots to analyze markets can make it easier to spot opportunities with the most potential.

Reasons Why Crypto has the Potential to be a Good Retirement Investment

Retirement investments typically focus on low-risk, long-term strategies. This sees users enjoy a comfortable return on the money that is tied up. Crypto investment might seem riskier, but the potential rewards can make it a good option.

Growth Potential

The growth potential for cryptocurrencies is massive, with Bitcoin being the perfect example. At the time it was launched in 2009, it was basically without value, growing to less than $0.01 by 2010. It is currently trading for just under $120,000, with many early investors lucky enough to make a lot of money from it. 

While it is unlikely that another cryptocurrency will hit these same heights, there is still great potential for growth for new projects with specific use cases. As crypto continues to be accepted by different industries, confidence will grow, and the top coins are likely to enjoy stability. Finding the next big thing in crypto could even offer the potential of early retirement for some investors.

Diversification

Portfolio diversification is always recommended for investments, with the old adage of ‘putting too many eggs in one basket’ ringing true for many investors. While many consumers would have loved to have sunk every penny they had into Bitcoin when it first started, there are countless examples of crypto projects that failed to get off the ground.

Traditional investment assets like stocks and bonds will be most people’s port of call for retirement funds, but diversification through crypto investment could reap serious dividends.

Theoretical Hedge Against Inflation

The finite supply of Bitcoin (capped at 21 million) has seen some experts refer to it as digital gold, with investment experts seeing it as a hedge against inflation. The aggressive expansion of money supplies by central banks could end up positioning digital currencies like Bitcoin as an excellent alternative.                                                                                                                                                                                          

Global Liquidity

Cryptocurrencies offer flexibility and responsiveness as markets never close. Global liquidity also protects consumers against potential political unrest that could impact currency values and banking systems. 

Self Custody

Decentralized ownership of digital currencies gives consumers greater control, without the influence of banks and intermediaries. This can improve security and freedom, especially if retirees are considering moving to a different country where fund transfers and currency exchanges could eat into a large portion of their savings.

Crypto Considerations

All investments have considerations, and cryptocurrencies are no different. If you are considering crypto as part of a retirement plan, understanding the risks is essential.

Market Volatility

While the crypto market has stabilized to some degree, thanks to political backing, there is no guarantee that this will last. Crypto is a traditionally volatile market, and values can be affected by a variety of reasons, including political instability, regulatory changes, and market trends.

Regulatory Uncertainty

The Trump regime has promised regulatory change to improve crypto’s potential for growth in the US. However, this will not be global and different countries will have different approaches. There is also the threat that when Trump’s presidency ends, the next candidate could have an anti-crypto stance and make regulatory changes that limit the market.

Storage 

Crypto storage is something that consumers will have to consider if they plan to include it in their retirement plan, with cold storage options running the risk of being lost. Crypto wallets offer some additional levels of security, but there is still the risk of hackers gaining access.

The Speculative Nature of Cryptocurrencies

The reputation of cryptocurrencies is growing, but compared with fiat currencies, they are still in their infancy. This means that crypto markets can still be driven by speculation, sentiment, and hype. While there are positives associated with this, it can also work against it. A market crash could see a loss in confidence in cryptocurrencies, and markets could turn back to fiat currencies.

How to Limit Crypto Investment Risk

Weighing up the pros and cons of crypto investment for retirement plans should help you determine whether it is the right option for you. Seeking financial advice is recommended, and you may be advised to consider using crypto IRAs that offer tax benefits on crypto investments. Financial advisors will typically advise limiting crypto to around 5% of a retirement portfolio, and sticking to established coins like Bitcoin and Ethereum should offer the best long-term stability.

Retirement plans don’t have to be set in stone, and regularly rebalancing to reduce risk and maintaining the intended allocation can be a good option. Fully researching all crypto projects should help to minimize risk, and using it as part of a retirement plan can be a good idea.