- Date : 01/09/2022
- Read: 3 mins
Cryptocurrencies for retirement planning!
Cryptocurrencies as an asset class have become very popular in the last few years. As per Coinmarketcap, there are more than 20,000 cryptocurrencies across 520 crypto exchanges. The total market cap for cryptocurrencies is more than one trillion dollars. The top 10 cryptocurrencies include Bitcoin, Ethereum, Dogecoin, Cardano, Solana, BNB, etc.
Currently, bitcoin is the largest cryptocurrency in the world, followed by Ethereum. Cryptocurrencies are adopted on a global scale by people of all age groups. Now it's not just about trading in cryptocurrencies; other products like NFTs, Defi, Web3, Metaverse, etc. have become popular. Considering that the market for cryptocurrencies is becoming big, should you invest your retirement money in cryptocurrencies?
Retirement planning and cryptos
Retirement planning is the process of investing your money today so that you can retire comfortably in the future. To maintain your lifestyle even after retirement, you need to invest your money sincerely. You should have a financial plan to secure retirement in the future.
Cryptocurrencies as an investment option are subject to market risks and other external factors. Although the risk factors are similar to stocks, one big risk factor with cryptocurrencies is that cryptocurrencies are not regulated. The volatility in cryptocurrencies is much higher than in stocks, and also the mechanism of cryptocurrency valuations is opaque.
Despite all the risk factors associated with cryptocurrencies, the mass adoption of cryptocurrencies has been spectacular. With global investment banks now putting cryptocurrencies in their retirement portfolios, the use of cryptocurrencies as a financial asset is set to increase. Although it is risky, it has become an asset of the 21st century.
As per the experts, you should invest in cryptocurrencies but should limit your exposure to 10% only. This will ensure that you can gain from the huge gains in the cryptocurrency market, but a 10% will not affect your portfolio too much if the cryptocurrencies collapse.
What should you do?
You can invest in cryptocurrencies with a long-term perspective and can even make the asset class a part of your retirement portfolio. You should limit the exposure to 10% and should invest in the top cryptocurrencies only. With major investment banks now increasing their exposure to cryptocurrencies in their clients’ retirement portfolios, the demand for cryptocurrency will increase.
Although the cryptocurrencies have come down to a valuation of $1 trillion, the big cryptocurrencies look stable for long-term exposure. Top analysts have been calling for the collapse of the cryptocurrency market, but in vain. It has been seen in the past that cryptocurrencies have recovered each time. Therefore, if you have the holding capacity, you can invest in the asset class and even hold the asset in your retirement portfolio.
But, before investing in cryptocurrency, make sure you understand the regulatory risks involved. Although the Indian government has not banned cryptocurrency, the RBI has advised the Indian government to ban cryptocurrency. Therefore, there are chances that cryptocurrency might be banned in the future. The probability of this happening is relatively low because cryptocurrency is now an accepted asset class globally.
Also, cryptocurrency is considered a Virtual Digital Asset (VDA). The taxation laws state that VDAs are taxed at a 30% slab. Also, no exemptions and deductions are available in cryptocurrency.
Also Read : Leading crypto trading platforms in India
Future of Crypto in India | Cryptocurrency Investing x Nischal Shetty
Disclaimer: Investing in cryptocurrencies is subject to market and regulatory risks. Read all the relevant details before considering an investment in cryptocurrency.