Cryptocurrencies are highly volatile. In fact, Bitcoin dipped below $6,000 momentarily again. And so far, it’s quite far from its near $20K peak last December. And for this reason alone, it is important that investors only invest money that they are willing to lose. Unfortunately, there are some people who are relying on cryptos as their retirement.
The notion of a digital currency-based IRA has been in the news lately. This means that instead of putting your money on stocks and other less risky investment vehicles, you place your funds into a cryptocurrency account. The SEC warns individuals who are looking to rely on cryptos for their retirement for several reasons.
Why Should Retirees Be Wary of Cryptos?
For one, the obvious reason is that cryptocurrencies are highly volatile. Just a few weeks ago, Bitcoin was able to hit $8,500 when people were anticipating a possible Bitcoin ETF. But once the anticipation fizzled out, and the SEC decided to postpone having a decision on the matter, things went south and Bitcoin even dropped below $6,000 before getting back up. And also, things are also looking bad for the altcoins. Ethereum reached the lowest point of 2018 recently at $287.
Next, you also have the prevalence of fraud. According to a study, one in every five ICO is actually a scam. And though regulators are doing their best to regulate the niche, it still lacks transparency and regulatory clarity. In fact, despite SEC considering Bitcoin and Ethereum as commodities, Ripple is still in a grey area and dealing with a number of lawsuits claiming that XRP is actually a security.
According to Lori Schock who is the director of SEC’s Office of Investor Education and Advocacy, “Now that some self-directed IRAs include digital assets – cryptocurrencies, coins and tokens, such as those offered in so-called initial coin offerings (ICOs) – we think it is important to alert investors about the potential risks and fraud involved with these kinds of investments that may not be registered”.
Too Good To Be True?
If you will ask Lisa A.K Krichenbauer, the president of Omega Wealth Management in Arlington, Virginia, she says that in this scenario, the old adage “if it’s too good to be true it probably is” can be applied to these scenarios. She says that there are a lot of companies offering self-directed IRAs and coin investments that can’t be trusted. It is imperative that customers educate themselves before they even choose to make the jump.
Should you be relying on cryptocurrencies as your retirement? Now, this can actually be a nightmare. Keep in mind that no one knows exactly where Bitcoin is heading in the coming weeks or months. It is possible that Bitcoin will shoot up but it is also possible that the complete opposite is going to happen.
Though there is a chance that a Bitcoin ETF is going to be approved by September, no one knows exactly whether the SEC is going to say yes or not. As of now, it is true that the crypto market is struggling.