The value of bitcoins has seen exponential growth since the beginning of this year. It is an extremely alluring option for today’s investors, both individuals, and institutions. Bitcoins have emerged to be a lucrative investment option for post-retirement schemes. According to a survey conducted by deVere Group, it was found that more than 70% of their clients were about to or had already invested in Bitcoin as part of their post-retirement schemes.
Bitcoin Investment In 401k Retirement Plans:
Recently, a 401k provider known as Forusall Inc. announced that workers in different plans can invest up to 5% of their contributions for 401k in Bitcoins, Ethereum, Litecoin, and other forms of cryptocurrency. This was undertaken in collaboration with Coinbase Global Inc., which is a leading cryptocurrency exchange. Prior to this, there were no provisions for investing in bitcoins as a part of the post-retirement scheme of the employees.
It is safe to say that introducing crypto investment in post-retirement schemes under 401k gives greater exposure to retail investors. With the growing popularity of cryptocurrencies like bitcoins, numerous businesses have adopted crypto transactions. Therefore, not have the option to invest in cryptocurrency as a part of a post-retirement scheme could deprive people of their basic necessities.
This is because, in a world where the traditional financial systems have been taken over by cryptocurrencies, it is imperative that the consumers have access to bitcoins and other forms of cryptocurrency. Taking a cue from ForUsAll, other companies in the 401k industry such as Kingdom Trust are introducing crypto investments in their post-retirement schemes.
Things to Keep in Mind About BTC Price
There is no doubt that the returns on investing in cryptocurrencies like Bitcoin have proved to be quite high over the last few years. However, before investing in bitcoins as a post-retirement plan, one must keep Bitcoin’s price volatility in mind. Since its invention, Bitcoin values and returns have suffered massive ebbs and flows. Due to market hypes about its valuation, Bitcoin prices have suffered price bubbles and subsequent crashes as well. Therefore, it is not safe to completely depend on crypto investments for basic necessities after retirement. However, those who are willing to take the risk may invest some amount of money that they can speculate with abandon.
Risk of Crashing:
Apart from the great price volatility, there is a risk that the price of bitcoins will altogether crash in the next two years. As per researchers, cryptocurrency values may crash by 40% in the next two years. It was discovered that when a particular industry beats the market by 100%, the chance of it crashing in the trailing two years is as high as 50%. Guess what, the trailing two-year return for the Bitcoin industry is 100%. It is safe to conclude that investment in bitcoins is not a completely secure investment for post-retirement schemes.
Variation in Fair Value:
There are numerous theories for determining the fair value of bitcoins based on multiple factors. However, the most relevant theory is the “network effect”. In simple terms, this theory points out that the value of the bitcoins depends on the total number of bitcoins that have been mined up until then. This model was introduced by Claude Erb who was a commodities portfolio manager at TCW Group. The underlying code of Bitcoin suggests that there won’t be more than 21 million bitcoins, a price of $74,000 per Bitcoin may be reached until 2140.
As has been highlighted in this article, bitcoins are an unstable asset and cannot be relied on completely for basic necessities post-retirement.
However, the bitcoin industry is constantly evolving and the prospects of stellar returns on investment encourage retirees or near-retirees to invest a small percentage of their wealth in post-retirement plans. Visit https://bitcoin-prime.io to know more about crypto investing.
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