With Fidelity announcing that it would allow customers to add crypto to their 401Ks, and Janet Yellen pronouncing that crypto isn’t a suitable retirement option, what are the drawbacks and advantages?
Fidelity is the largest retirement plan provider in the U.S., and when it announced recently that it would offer investors the opportunity to add bitcoin into their 401Ks, the cat was thrown firmly among the pigeons.
You would think that such a move would be anathema to the traditionalists, and Treasury Secretary Janet Yellen has put voice to such concerns when she said at an event in Washington yesterday:
“It’s not something that I would recommend to most people who are saving for their retirement. To me, it’s a very risky investment.”
Bitcoin is seen by many in the traditional financial sector as a very speculative asset, and therefore many would argue that it certainly shouldn’t be acquired by someone looking to build something as safe as a retirement portfolio.
However, not everyone might agree with this assessment. Granted that bitcoin has moved down a very substantial amount since the end of last year, and it is currently sitting at around 56% less in that time.
For all that, retirement pensions contain assets that have time frames measured in years, not weeks and months. Given bitcoin’s history, albeit short, it could well continue to make some fantastic gains into future years.
Even for the exceedingly conservative retirement portfolio, having a small percentage of an asset such as bitcoin probably wouldn’t be termed as particularly risky.
The downside for bitcoin is that it loses its major support at around $29,000, and that it goes down to $20,000, or if we are talking a fairly cataclysmic drop, then perhaps $14,000 or even lower may be on the cards. For such a scarce asset, wouldn’t it be likely to be bought up very quickly once it had found a bottom?
And what about the upside? It can very well be argued that the upside could be many multiples from where it is now. Yes, bitcoin is volatile, but holding it for 5, 10, 20 years has the potential to see it return far better gains than any other asset currently.
Each individual investor needs to be comfortable with the size of their risk, and should invest accordingly. No asset can guarantee high returns, and in the current extremely uncertain economic environment professional advice should be sought, and great care should be taken.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.