Drezidal/Getty Images
Cryptocurrency is one of the most hotly debated asset classes in the world. Enthusiasts, on the other hand, see it as the currency of the future, complementing or even replacing money as we know it. On the other hand, some experts believe that investing in cryptocurrencies is a fool’s game and that most, if not all, investors will eventually lose money investing in cryptocurrencies. states.
Learn more: 13 cheap cryptocurrencies with the biggest upside potential for you
Find out: 3 things to do once your retirement savings reach $50,000
But the first step to investing success is removing emotion from the equation. With that in mind, here we take an unbiased look at the facts surrounding cryptocurrency and consider whether it’s a good investment for retirement savings.
Earning passive income doesn’t have to be difficult. You can start this week.
What are the potential benefits of investing in cryptocurrencies?
Cryptocurrencies like Bitcoin can yield incredible profits when operated.
For example, in 2013, Bitcoin recorded an amazing return of 5,189.37%, followed by a huge return of 1,162.50% in 2017. Over the past 12 years, the average annual return for cryptocurrencies has been 105.1%. It has more than doubled every year for the past 12 years.
These types of returns are far below the returns of the S&P 500, which is up only 14.40% for the year, or 431.68% total.
Try this: The 2 best ways to invest $1 a day – and what it can grow into
What are the risks?
As with any asset class with such extraordinary upside potential, the risk of loss when investing in cryptocurrencies is also high.
According to a study by Coin Kickoff, over 2,500 cryptocurrencies “disappeared” between 2013 and 2022. This clearly shows that if you choose the wrong cryptocurrency, you risk losing all your funds.
Even Bitcoin, by far the largest industry leader among all cryptocurrencies, lost more than half of its value in three calendar years: 2012, 2018, and 2022. During these years, Bitcoin’s returns were -50.19%, -72.13%, and -. 62.02% each.
Do reputable financial professionals support investing in cryptocurrencies?
Suze Orman is probably the most famous financial expert who supports investing in cryptocurrencies. As Orman told CNBC, “Everyone should absolutely be exposed to Bitcoin.”
However, it is worth noting that Orman does not believe that cryptocurrencies will change the world or become a new currency. Rather, she recommends investing in it solely for demographic reasons.
According to Orman, “As young people earn more money and mature,[Bitcoin]will become one of their investments of choice, which will drive the price of Bitcoin up… because the younger generation… Because people are fascinated by Bitcoin. And you can see the energy of it” — so many people are interested in it that it’s very likely that it will eventually catch fire. ”
the story continues
But importantly, even Orman sidesteps her recommendation, saying: So put as much money into it as you can afford to lose. ”
But Orman is not alone in his bullishness. For example, investment firm Bernstein expects Bitcoin to reach $200,000 by the end of 2025, as reported by Forbes magazine, and bullish investor Ark, according to Investors Business Daily. Invest’s Cathie Wood predicts that the price of Bitcoin will reach $3.8 million by 2030.
Is there anyone who disagrees?
The list of financial experts who say we should stay away from cryptocurrencies is long and prominent. Here’s what some of the most prominent people have said:
Warren Buffett, CEO of Berkshire Hathaway, known as the “Oracle of Omaha” for his investment skills, said, “If someone says they own all the Bitcoin in the world and offers it to you for $25, I won’t respond,” he said. He also called it “rat poison squared” and “a gambling token with no intrinsic value.”
Financial guru Dave Ramsey: “I don’t want people I really hate investing in Bitcoin.”
Investment firm Charles Schwab: “There are several potential benefits that may be attractive to some investors… However, virtual currency prices are highly volatile and fluctuations can result in significant financial losses.” There is still potential for financial loss.”
Investment manager Jim Rogers: “Bitcoin will one day disappear and become zero.”
So, should you invest your retirement assets in crypto assets?
You shouldn’t put all of your retirement money into a single investment, especially one that’s highly volatile like cryptocurrencies. However, some experts suggest that if you have a high risk tolerance and can handle the volatility of cryptocurrencies, you can consider an allocation of 5% or less.
But as Suze Orman said, you should only invest money you can afford to lose completely. Carefully analyze your investment objectives and risk tolerance, and consider consulting a financial advisor before placing cryptocurrencies in your retirement account.
Details of GOBankingRates
This article originally appeared on GOBankingRates.com: Cryptocurrency and retirement savings: Should you take the risk?
