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Everywhere you look, there seems to be an enormous amount of ads persuading people to invest in cryptocurrency. With the growing popularity of this market, many are starting to take the risk of investing their retirement savings into Bitcoin and other cryptocurrencies. Even companies such as Fidelity are allowing their patrons to invest their 401ks into crypto if their employers see fit. However, the crypto market is a volatile one and the criticism against investing in it is valid.
Since cryptocurrency is still a new concept for most people, companies take advantage of this by marketing themselves as an easy and safe way to grow one’s assets. Apps like Robinhood encourage their users to put their money into Bitcoin or Dogecoin with the reassurance that their money is in a safe place. However, too many people are getting excited about this without even knowing much about it. In fact, cryptocurrency is not a hedge against inflation. As we’ve seen in the recent drop in Bitcoin, as the market plummets, it has dragged cryptocurrency down with it. Although many people believed that Bitcoin would be a hedge against inflation, its stock sunk alongside the rest of the market 一 stripping people of their assets.
Bitcoin in the last several weeks has lost almost a quarter of its value and if you had invested a quarter of your 401k into Bitcoin, then a quarter of your worth was just wiped out. People are left in a very vulnerable position when they invest their money into cryptocurrency. There’s no way of predicting how the market will affect crypto, so if one were to pick the wrong cryptocurrency to invest in, it could have an adverse effect on their retirement. It’s a tragedy for many who invested into crypto with the hopes of growing their future savings only to find much of it cleaned out after the recent drop in Bitcoin.
Cryptocurrency is also inaccessible to the everyday investor. There is a high cost of entry as it relies so heavily on technology and not everyone has the same access to technology to mine and use Bitcoin. Cryptocurrency is geared toward more affluent investors whereas those who make less, know less about investing into crypto. On the other hand, crypto companies are trying very hard to market themselves as something easily accessible and understandable to the everyday investor 一 but people should not fall for this trap.
There are much safer ways to invest your money for the future that don’t involve cryptocurrency. Investing your retirement money in traditional index mutual funds such as the SMP500 offers a broad diversification of companies. When someone invests in Bitcoin or Dogecoin, their assets are in danger because they are all in one place which makes the risk of losing your money much higher. However, when your risk is spread out amongst 500 companies there is less of a chance that a sudden drop in the market will affect your assets. Selecting mutual funds that offer diversification helps to mitigate the risk that comes with investing.
It is clear that cryptocurrency is not a safe vessel for your retirement savings. Learning this sooner rather than later will save you from making the same mistakes as many others have when investing in crypto.