The Case for Bitcoin and cryptocurrency as a Retirement Investment
Looking for a place to stash your retirement savings? You might want to look into the world of cryptocurrency.
Long the domain of hardcore libertarians and, let’s face it, the criminal underworld, cryptocurrency is starting to mature in no small part due to the interest of Wall Street fund managers who see it as the next big thing.
Don’t be surprised if you hear about friends of yours sticking their retirement dollars in cryptocurrency in 2018. Be even less surprised when a cryptocurrency exchange-traded fund or index fund appears on the New York Stock Exchange.
One thing is certain. We’re past the point where Bitcoin is a niche interest. The financial news pages have been littered with stories about Bitcoin this year — where it’s been and where it’s going.
While there’s certainly been some volatility in the market, many signs point toward Bitcoin being a solid bull, hence the interest in creating exchange-traded funds and other instruments suitable for retirement investment.
Bitcoin, of course, is not the only game in town with Ethereum, Monero and others grabbing headlines as well. Here’s why you should be bullish on Bitcoin, Monero and other cryptocurrencies.
Bitcoin Is Resilient
The news of Bitcoin’s death has been premature. Example: This smug LA Times article from 2013 hasn’t aged well.
While there have been significant market corrections, such as the one earlier in the decade that wiped out approximately 70 percent of the coin’s value overnight, Bitcoin always seems to recover — and along with it, cryptocurrency in general.
It’s difficult to imagine Bitcoin fading away as long as the idea of cryptocurrency remains.
Crypto Is Going Mainstream
You can make purchases with Bitcoin on Overstock. You can buy your Sacramento Kings season tickets with it. Restaurants in Silicon Valley are happy to accept Bitcoin and will even give you a discount if you use it.
The payment company BitPay works with more than 125,000 merchants worldwide that accept Bitcoin as a means of payment. Bitpay even allows Bitcoin users to stock a Visa credit card with Bitcoin, which allows users to spend Bitcoin anywhere that Visa is accepted.
Some of the large companies that accept Bitcoin include Dell, Microsoft, Virgin Galactic, and Tesla. Why not? It’ll probably be worth more tomorrow than it is today.
The point here is that the whole “you can’t use Bitcoin to buy anything” trope is more fiction than fact.
Sure, you probably can’t hit the corner grocery store with it, but someone bought a house with Bitcoin and made a cool $1.3 million profit on the deal while they were at it.
People Smarter Than You Are Bullish on Bitcoin
Ok, this one is pure appeal to authority, but it’s worth mentioning anyway: There are financial professionals who are solidly behind Bitcoin.
Fundstrat predicted the king of crypto would be worth $11,400 per coin by mid-2018. (It already passed that mark in early December 2017.)
Former fund manager Mike Novogratz said he believed a single Bitcoin would top ten grand by the end of 2017. (Also, it got there a bit earlier than he expected.)
Sure, there are financial experts out there who think the whole thing is the tenth coming of Dutch tulips, but here’s the thing: The naysayers have been consistently wrong for the last eight years.
Big Money Is Discovering Bitcoin
Want to know who else believes in Bitcoin? Bank of America. It banking executives believe that once exchange-traded funds hit, the United States Bitcoin market alone will total $1.6 billion.
That’s going to mean a significant increase in the price of a single coin. What’s more, it could potentially mean a circle of confidence with regard to Bitcoin.
Once Main Street starts investing there and the value goes up, that will encourage others to trust their retirement savings and investments with cryptocurrency.
If and when these kinds of funds crop up, that could represent the kind of tipping point the Bitcoin super bulls are talking about when they say they anticipate million dollar coins.
Bitcoin Is Still Cheap…
Think you can’t afford to get into Bitcoin because of the price tag (currently north of $10,000 per coin)?
Think again. Bitcoin can be bought in fractions, the smallest of which is one one millionth of a coin or a satoshi. The main question as to whether or not Bitcoin is still cheap is whether or not you think it will be worth more in ten years than it is today.
If you think the future of Bitcoin is in the $12,000, $100,000 or $1 million range, then Bitcoin is still dirt cheap.
You might not be the guy who spent $100 in 2010 and is now worth $7.4 million, but you can certainly follow PayPal board member Wences Casares’ advice — put 1 percent of your income into Bitcoin and forget about it for ten years.
...And Even If It’s Not, Other Cryptos Are
Maybe Bitcoin is too expensive to be a worthwhile investment. That doesn’t mean other cryptos are.
Penny cryptocurrencies, like penny stocks, require a great deal of leverage and a great deal of risk to make worthwhile. However, a moonshot for a coin worth $0.0001 is a lot lower than one worth over ten grand.
The right investment in the right crypto means that you only need the price to move up to a dollar or ten to keep you in Lamborghinis for the rest of your life.
Bitcoin Frequently Exceeds Even Bullish Expert Opinion
While Bitcoin’s bears and naysayers have been wrong, anticipating a total collapse of the cryptocurrency market, so have the bulls been wrong.
They’ve consistently underestimated the value of Bitcoin on the open market.
One example among many: Fundstrat founder Tom Lee said in August of 2017 that Bitcoin would go up to $6,000 per coin by mid-2018.
That mark was passed quite a bit shy of that, somewhere in October of this year.
The Internet is littered with expert predictions of bullish Bitcoin breakouts, all of which fall far south of where Bitcoin actually goes.
The Halvening Looms
As you might know, Bitcoin’s supply is controlled. Unlike fiat currency, you can’t just create Bitcoin because it’s politically expedient.
Every 210,000 blocks, the reward for miners — effectively, the creation of new Bitcoins — is cut in half, or made twice as difficult, depending on how you choose to look at it.
The basics of supply and demand would seem to suggest this will mean an explosive growth in the value of Bitcoin.
Provided that interest in Bitcoin hasn’t completely evaporated by June 2020, the Bitcoins you buy today could be worth a lot more not that long down the road.
Taking the Plunge
So how much should you invest in Bitcoin?
The answer is the same as any other potentially risky investment: However much you can afford.
However, if you’re on the side of the ultra-bulls, the “1 percent of your total net worth, then forget about it” isn’t a bad idea. Others invest more. Only you can ultimately assess your own risk tolerance and ability to invest.
Remember the position of the ultra-bears who believe the true value of Bitcoin is zero. So far they’ve proved incorrect, but “unprecedented” is not a synonym for “impossible.”
Disclosure: The author of this article is invested in Bitcoin and Monero, as well as other cryptocurrencies not mentioned in this article. The author is not a financial advisor and this article should not be construed as financial advice. All forms of trading and investing are highly speculative, especially trading in cryptocurrency. Past performance is not indicative of future results.