Are You Growing Old with Bitcoin?

bitcoin

If you think bitcoin or cryptocurrencies are just a young person’s game, think again.

More people than ever in the U.S. are turning to bitcoin or cryptocurrencies to help with their retirement, it seems, even as the recent market carnage provides a stark reminder that this crazy market is not for the lethargic.

A poll released last week by cryptocurrency exchange KuCoin found that about 27 percent of Americans aged 18-60 – about 50 million people – have owned or traded cryptocurrencies in the past six months.

However, seniors are more enthusiastic than the general population about the younger asset class, with 28% of those 50 and older betting on cryptocurrencies as part of their early retirement plans, according to the survey conducted in late March.

Their most popular reasons for investing in cryptocurrencies are that they see them as the future of finance, they don’t want to miss out on a hot trend, and they see it as a way to diversify their portfolios.

Market turmoil in recent weeks has quieted talk earlier in 2022 that bitcoin and other cryptocurrencies would win mainstream acceptance and be included in pension plans.

“If they [investors] want cryptocurrency, it should be a very small allocation in their portfolio, and they should be prepared to lose it,” said Erik Knutzen, chief investment officer for multi-asset class strategies at Neuberger Berman.

“We’re not going to recommend it to everybody.”

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Indeed, Bitcoin is trading around $30,000, down 60% from its November peak of $69,000. And the market’s collapse means many newcomers are deep in the red on their investments.

Nonetheless, cryptocurrency investors and analysts are watching like hawks for any signs that bitcoin might rebound.

JPMorgan’s Nikolaos Panigirtzoglou and his global strategy team said last week that the cryptocurrency chaos has soured investor sentiment so much that certain indicators portend “good entry points for long-term investors.”

JPMorgan said bitcoin funds, including exchange-traded funds (ETFs), saw the largest outflows since May 2021, adding that proxies for its positions in bitcoin futures on the Chicago Mercantile Exchange are approaching oversold territory.

Using a model based on the volatility of bitcoin versus gold, the team estimated the “fair value” of bitcoin at $38,000.

The KuCoin poll comes a week after a Federal Reserve survey of 11,000 adults found that 12 percent of Americans dabbled in cryptocurrencies as an investment last year.

The survey did not break down participants by age, but found that almost half of those holding cryptocurrencies as an investment had annual incomes of $100,000 or more, while almost a third had incomes below $50,000.

Still, if older investors are entering the new cryptocurrency vanguard, have asset managers rushed to meet that demand?

Fidelity Investments caused a stir in April when it announced that individuals will soon be allowed to distribute a portion of their retirement savings in bitcoin through their 401(k) investment plans.

“Fidelity has always operated and made decisions with the highest integrity and a strong commitment to our clients, including those saving for retirement,” a Fidelity spokeswoman told Reuters.

But if anecdotal evidence from a Reuters-sponsored summit of investors and asset managers in New York last week is any guide, it could own the 401k cryptocurrency market for some time.

The general consensus is that cryptocurrencies are too volatile for retirement. Unless you are a sophisticated investor, such as a hedge fund, or are prepared to swallow huge losses, then it is best to steer clear.

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