Young Americans Put Their Retirement Savings in Bitcoin
Jul 31, 2017 Posted / 2117 Views
Thousands of American investors as young as 20 years old are investing their hard-earned money in Bitcoin despite the high risks.Investors have been bullish on bitcoin all this year because of its rapid appreciation, but now, mom and pop buyers are also looking for a way to benefit from its price surge, despite the big risks.
The popular cryptocurrency, bitcoin, may be highly volatile, but that didn't deter early adopter Roy Trimboli. Roy calls himself '11,' since he's the proud owner of the eleventh-ever BitcoinIRA. He says he's been a conventional guy since 22, always maxing out his 401(k) and investing in blue chip mutual funds, but a year ago, he put 10 bitcoins into a BitcoinIRA. He says he's now up about 300 percent.
"It's a couple of generations worth of returns," he says.
'11' is now just one of over 700 individual account holders, including clients as young as 20-years-old.
But even with these kinds of returns, the fact remains, a speculative asset like bitcoin or ether comes with a certain degree of risk. Cryptocurrencies don't sleep. They're literally always moving, and if recent history is any indication, they're prone to seismic price moves in a very short space of time.
Campbell Harvey, a finance professor at Duke University, says this kind of volatility is brutal. "We're talking six times the volatility of the S&P 500 or five times the volatility of gold." He says it has to do with the fact that this is new technology, "and it's not easy to think about the fundamental value of a cryptocurrency."
That brutal volatility he's talking about is partly to do with the fact that these cryptocurrencies aren't collateralized. They're valuable, because people believe they're valuable. That's a big part of why Campbell says he's really worried about the BitcoinIRA.
"I'm worried that people will put too much of their retirement in an asset like this. It's a very small piece of the market right now and it's extremely volatile. To put this into your savings, you need to be willing to lose everything. If you put your retirement savings into the stock market, there is almost no chance that you're going to lose everything."
Risk aside, a BitcoinIRA itself isn't free. If you sink any less than $50,000 into your crypto nest egg, you'll face a hefty 15 percent set-up fee. But clients like Damon Smedley remain undeterred. He invested $330,000 into his BitcoinIRA last November.
"You look at where I was one year ago, versus where I'm at today, and it's quite a drastic difference," Smedley said.
When it comes to the future of money, there is a growing consensus that cryptocurrencies are set to play a major role. One cryptocurrency, in particular, has entered the public lexicon as the go-to digital asset: Bitcoin. But the cryptocurrency market is significantly more complex than the public lexicon might suggest but it dominates over other digital currencies today.
Another factor in the market is that cryptocurrencies aren’t used only as currency. Bitcoin is also widely used for speculation and can also be used for nonmonetary uses such as timestamping.
It's not just the promise of a crazy return that's intrigued savers, it's also the fact that it's a hedge against the inflationary tendencies of mainstream currencies. Central banks in countries around the world have been printing cash to prop up their struggling economies, but that goes hand in hand with inflation.
In the U.S., gold, stocks, and bonds have long been the traditional hedge against inflation and the rising dollar. But now, bitcoin and ethereum offer an alternative way to beat inflation, though it's clearly not for the faint of heart.
One thing is for sure, despite its volatility, this new cryptocurrency asset class isn't going anywhere.
Applancer is an open platform for discussion on all things like Blockchain , Cryptocurrency and Ico news updates. As such, the opinions expressed in this article are the author's own and do not necessarily reflect the view of Applancer .
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