What Is Crypto’s Role In Your Retirement Plans?

News, Opinion | October 18, 2021 By:

The crypto market has experienced exponential growth in recent years and has introduced a larger and more diverse base of investors to the possibilities of crypto investment. But is crypto investment only for those looking to feverishly ride the radical rises and precipitous falls of a sometimes volatile market? Hardly. In fact, more and more retirement planners are coming to cryptocurrency for its considerable potential to outperform traditional assets in today’s market. So, where does crypto fit into your retirement plans?

For starters, as any financial planner would tell you, your investment portfolio should be tailor-made to suit whatever level of risk suits your planning needs. The million dollar question is: “How risky is crypto as an investment option? Opinions on the long term viability of cryptocurrency range from one extreme end of the spectrum all the way to the other. Some financial experts would label cryptocurrencies as a highly speculative asset with no foreseeable hope for utility, while others would maintain that many cryptocurrencies are globally traded with the potential to achieve incredible year over year growth.

If you take the relatively conservative tact that many have adopted and consider Bitcoin to be “digital gold”, then investing as much as 5-10% of one’s liquid net worth in BTC seems a viable strategy to employ. Certainly the more experienced and risk-inclined traders of crypto can improve their returns by buying dips and selling into rallies and strong markets. Despite the peaks and valleys, the overall crypto market is beginning to normalize returns over time. Diversification also proves useful where volatile markets are concerned, making some yield farming and lending portfolios best for long-term application and compounding.

As cryptocurrency continues to gain traction within mainstream financial markets, how are financial planners currently advising their clients in regards to the industry? The answer is the vast majority of them are scrambling to show involvement. Mostly through trackers in jurisdictions like Sweden (Saxo Bank- one of the investment bankers’ favorite way to hide level of involvement, etc.) and equities with exposure (US & Canada mostly). Exposure for the sake of exposure is not an advisable strategy, however. Without a well thought out and battle tested strategy in terms of selection and timing in place, the end results for their clients could prove disastrous.

How then should a crypto-savvy retirement expert be advising their clients? For those with the appropriate individual risk profile, the ratio could be as much as 20% of their liquid net worth with a huge chunk of that percentage in BTC. Yes, volatility within the crypto sphere remains higher than in traditional markets, as is often the case as it pertains to innovative technologies and futuristic investment themes. One only needs to look back on the dot com era, for example. However, as more and more financial institutions and investors enter into crypto investment, as has been exhibited over the past few years, the overall market health will become more stable and offer the sort of steady returns that provide a boost to any properly balanced retirement portfolio.