When cryptocurrency first debuted, it appeared to be an irreverent break from the norm, providing an alternative currency without much, if any, oversight from the Fed.  Others insisted the primary appeal of cryptocurrency was its ubiquity.  

Instead of carrying a wallet or purse, crypto users can simply pay using Bitcoin on their smartphone.  However, cryptocurrency has proven to be quite dynamic, partially morphing into a legitimate investment vehicle that also provides utility through intangible digital payments via smartphones.

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Fast forward a decade and cryptocurrency might be one of the top investment vehicles.  Crypto might even replace the United States Dollar as well as other traditional paper-based currencies.  The question is whether cryptocurrency will help you add to your nest egg at a faster pace than other investments.  

Indeed, it is possible for crypto to help you reach your financial goal for retirement sooner than may otherwise be possible.  What matters most is that you invest your hard-earned money with the guidance of a fee-only CERTIFIED FINANCIAL PLANNER™ Professional in the form of personalized comprehensive financial planning. 

Why Cryptocurrency is a Valuable Tool for Building Wealth Across Posterity

Do not let the fact that cryptocurrency is comparably volatile scare you away from this legitimate investment.  The addition of cryptocurrency to your portfolio has the potential to catalyze your wealth-building in the short term and also in the years ahead.  Select the right digital coins, be patient, and hold those positions for months, years, or even decades.  Though crypto is an unconventional approach to investing, it is gaining momentum with the masses.  Americans are now turning toward crypto as a tool to grow their wealth similar to the stock market.  

A survey conducted by the University of Chicago’s NORC shows about 13% of those living in the United States bought or traded crypto last year. The survey also shows only 9% more of the country’s residents traded stocks in that period of time.  About half of all US households have some investment in the stock market.  As time progresses, both of these figures are likely to increase.  If crypto maintains its momentum, there is the potential for just as many Americans to invest in cryptocurrencies in addition to conventional stocks or even in place of traditional investment vehicles.

Cryptocurrency Could Be an Essential Component of a Diversified Portfolio

Much has been made of China’s phasing out of Bitcoin mining operations.  The country’s departure from this growing space presents a golden opportunity for other global miners, some of which are businesses available for investment as publicly traded companies.  

The influx of venture capital into the cryptocurrency industry appears to be an unstoppable force.  If the United States government had any intention of thwarting this emerging industry in a manner similar to China, it would have occurred by now.  

The unspoken truth is the federal government recognizes the technological potential of cryptocurrency.  Both institutional and retail investors have responded to the silent acceptance of crypto by adding to their digital coin holdings.  Though some have actively traded the many different coins, the more lucrative approach is buying and holding similar to other investment vehicles such as stocks, mutual funds, ETFs, etc.  

Even if you aren’t convinced cryptocurrency has merit, the mere fact that some of the top institutional and retail investors are adding crypto to their holdings means these digital value stores are not only legitimate but likely to increase in value as public interest expands.  

Crypto has exponential growth potential along with elevated risk so it makes sense to balance digital coin ownership with comparably conservative investments.  Your fee-only CERTIFIED FINANCIAL PLANNER™ Professional may be able to help you balance crypto investments with mutual funds, ETFs, money market accounts, bonds, and CDs.  

An Affordable Entry Point for Growth-Oriented Investors

It is no secret that young investors are paying quite the premium for stocks, especially publicly traded companies in the tech sector and those that are growth-oriented.  Paying a significantly higher multiple than what Generation Xers or Baby Boomers paid to own the same stocks certainly stings quite harshly for Millennials and Generation Z.  This is partially why crypto is so appealing to younger investors. Crypto may provide a comparably affordable entry point, a litany of digital coins to choose from, and the potential for growth.  

In short, crypto investing is becoming democratized.  Crypto has few barriers to entry, is affordably priced, and presents an intriguing alternative investment opportunity. Though the risk-averse crowd will largely continue to dismiss crypto and the risk-tolerant crowd may embrace it.  

A Hedge Against Inflation and a Bear Market?

It’s possible that inflation may continue hovering around 2% to 3% for the foreseeable future.  So-called “Trump Bucks” and “Biden Bucks” certainly stimulated the economy yet the influx of cash also devalued money, sending prices higher.  Digital currencies such as Bitcoin have inherent limits, meaning only a certain number of these value stores can be created.  As a result, crypto may not be devalued similar to the manner in which traditional currency loses value due to inflation.    

The prudent allocation of funds guided by an emphasis on diversification provides extensive exposure to investment vehicles including cryptocurrency.  Such extensive diversification ultimately should act to reduce portfolio volatility.  This potentially considerable reduction in volatility is a startling truth for some investors who stereotyped crypto as a passing trend.  The most successful investors typically maintain an open mind, perform their due diligence and meet with a financial advisor to discuss their options.  

At Sapiat Asset Management, we use a personalized process to identify the financial and retirement planning strategies that meet the needs of our clients. Our knowledge of your financial situation is a big part of the foundation that drives our relationship with you. Contact us today for a complimentary consultation.

Sapiat Asset Management is a Fee-Only, Independent, Registered Investment Advisor (RIA), specializing in goal-oriented financial planning and investment management for Gen X Individuals & Families, their Businesses, & the Trusts that benefit them and their heirs.