Is crypto a safe investment for retirement savings? 

This is a tricky question, Alex, because only a qualified financial advisor who has a holistic view of your financial situation can tell you whether crypto is a suitable investment. And ultimately, what you invest in should be based on your own research, and any risks you take will be yours alone. 

Cryptocurrencies can be extremely volatile, and their prices are affected by a wide range of factors. And typically, as investors approach retirement, they move away from riskier assets and towards safer ones, including fixed income investments such as bonds and guaranteed investment certificates (GICs). 

Having said that, there are some prominent supporters for crypto in a retirement portfolio. Firstly, U.S. senator Cynthia Lummis—a crypto owner herself—believes that investors can use bitcoin (BTC) to diversify pension funds and as a store of value. Secondly, Fidelity Investments, the largest provider of 401(k) retirement plans in the United States, has noted that it will start including BTC in its plans. As per Dave Gray, Fidelity’s head of workplace retirement offerings and platforms, crypto will pave the way for future generations “in the near term and long term.” 

Millennials are definitely looking to crypto for financial support in their golden years. Earlier this year, Yahoo Finance surveyed 4,000 investors and found that 28% of millennials expect crypto to help fund their retirement (and 38% already own some).

Is crypto right for your risk tolerance?

The answer comes down to your time horizon. Are you willing to hold cryptos for a long time period instead of panic selling when the price drops? It’s one thing for millennials to invest in crypto—they have the luxury of time—and another thing for people who are nearing retirement or already retired. The longer your time horizon, the more safely you can build a portfolio with aggressive assets.

Cryptocurrencies can be a powerful asset for diversification. Crypto is mostly uncorrelated to the general markets. As such, it can act as a hedge against general market inflation, which we saw during the pandemic when crypto handily outperformed every other asset class significantly. Note that I said mostly uncorrelated—currently, the correlation between crypto and stock indexes, such as the NASDAQ 100, is pretty high. Again, this uncertainty may be too much if you’re looking to build stable retirement savings and begin withdrawing funds soon. 

So, which coins should you consider when building a crypto-inclusive retirement portfolio? Obviously, you want something that grows in valuation, so stablecoins like USD coin (USDC) and Dai (DAI), whose values are tethered to the U.S. dollar, are out of the question. I think it could be better to go with “blue chips” like bitcoin and ethereum—but even then, limit them to a very small portion of your portfolio. But again, you should research crypto for yourself, and invest only if you’re confident that it’s a good decision for you. 

Jeremy Koven is the Chief Operating Officer and a co-founder of CoinSmart, a Canadian cryptocurrency trading platform. Sign up for an account* with the code money30 and receive CAD$30 in bitcoin when you deposit a minimum of CAD$100. 

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