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Investing in Cryptocurrencies for Retirement


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As the cryptocurrency market matures, there are an increasing number of options available to add the digital currency to retirement plans. 

Bitcoin has been consistently gaining momentum over recent yrs

Last year, BTC, the native cryptocurrency of the Bitcoin network hammered gold and the S&P 500 with a 164% return.

Gold, by comparison, rose 21% last year, and the S&P 500 Index gained 13%. Even with the current rebounding post-VirusCasedemic economy, Bitcoin continues to lead the pack as the most profitable asset class of the three. YTD it is up 69.55%, compared with a loss of 5.11% for gold and gainer of 19.26% for the S&P 500.

With that performance, it’s not surprising 40% of young investors recently said they were interested in including bitcoin and other cryptocurrencies in their retirement plans.

Bitcoin’s potential for growth is balanced, the risk becomes mitigated in the long term when you understand its properties. 

Bitcoin has a fixed supply of 21-M coins, which means that unlike with fiat (paper) currencies like USD, no more can be created once the circulating supply reaches that number. That is a Key upside for Bitcoin’s projected value over time, which is expected to increase as the purchasing power of fiat currencies decreases because of inflation.

For long-term investors it accentuates the assets’ limited supply. What is most interesting is that the Bitcoin stock-to-flow model suggests BTC could reach $1-M per coin by Y 2024. 

Hedge against inflation

Bitcoin’s price has also consistently outperformed gold since its inception in Y 2010.

Here’s how much $1 would be worth if invested in the given year.

2020 BTC: $3.78 | Gold: $0.93

2019 BTC: $4.38 | Gold: $1.28

2018 BTC: $5.14 | Gold: $1.49

2017 BTC: $15.39 | Gold: $1.44

2016 BTC: $64.24 | Gold: $1.36

2015 BTC: $146.02 | Gold: $1.68

2014 BTC: $74.70 | Gold: $1.41

2013 BTC: $434.83 | Gold: $1.38

2012 BTC: $4,631.80 | Gold: $1.13

2011 BTC: $3,109.53 | Gold: $1.12

2010 BTC: $776,397.69 | Gold: $1.56

One of the leading ways to invest in bitcoin for retirement is through a Bitcoin Individual Retirement Account (IRA). A Bitcoin IRA is self-directed, meaning the account owner chooses which investments they wish to make. That opens the doors to investing in alternative asset classes like real estate, precious metals and cryptocurrency. 

Bitcoin IRAs work much like traditional ones, except your money goes toward cryptocurrency instead of mutual funds.

Like with a Roth IRA, you pay taxes upfront on the assets you hold instead of when you come to withdraw them. That is advantageous for investments that yield high returns, as Bitcoin has a tendency to do. Bitcoin IRAs also have yearly contribution limits akin to traditional ones, typically around $6,000.

Many self-directed IRA providers include an “all-in-one” package, where the bitcoin IRA company partners with specific crypto exchanges. While 13% of all Americans traded crypto in the last yr, only 2-5% of all IRAs are invested in alternative assets, according to the Retirement Industry Trust Association. A number of Bitcoin ETFs have come to market up in the past yr to meet the growing demand of institutional investors entering the crypto market.

A small 401(k) provider called ForUsAll has partnered with crypto exchange Coinbase (COIN) to give their customers the option of investing up to 5% of their retirement funds into cryptocurrencies.

A 401(k) is an account that allows an employee to dedicate a percentage of their pre-tax salary to a retirement account, often matched by their employer.  The funds are typically invested in stocks, bonds and mutual funds, but demand is rising from retail investors to add cryptocurrency as an available asset.

According to the Investment Company Institute, 20% of the $34.9-T US retirement market is made up of 401(k) plans, worth $6.7-T.

If you want to avoid the hassle of setting up a Bitcoin retirement account, there are benefits to buying cryptos directly from an exchange and holding it yourself long term.

You avoid having to pay middleman fees, which can become costly if you plan on making a lot of transactions. You will also be able to contribute as much or as little as you want, avoiding minimum and maximum contributions found in traditional 401(k) and IRA setups.

This method also lends itself to the use of 3rd-party software from companies which automates exchange purchases so that you can more easily control your positions.

Investing digital assets long term is a great way to diversify your portfolio, and with more Northside than other alternative assets. While the asset is still in its infancy compared with a commodity like gold, it has delivered an annual average return of 891% (2011-2020.) Gold, over the same frame, has returned an annual average of 4.08%.

Have a prosperous day, Keep the Faith!

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Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he is the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.