More and more Australians are considering cryptocurrencies as part of their retirement strategy despite the coins’ volatile reputation, research has found.
One in four Australians under the age of 44 are thinking about using their superannuation funds to buy cryptocurrencies like bitcoin and ethereum, according to a survey by cryptocurrency exchange Independent Reserve.
In 2018, the bitcoin bubble burst in an infamous way, which resulted in more than $16,000 being wiped off the token’s price in less than two months.
While older Australians have less of an appetite for the digital tokens, the report still found 2.5 per cent of retirees plan to buy cryptocurrency within the next six months.
Speaking to The New Daily, Independent Reserve chief executive Adrian Przelozny said that number is likely to grow over time as the demographics of retirement begin to shift.
“As cryptocurrency matures, it’s becoming more and more of a legitimate asset class, and because it’s not correlated to a lot of traditional assets, people are using it as part of their portfolio to create a more balanced investment strategy,” he said.
“If you were to wait another two and a half years you’d see that 2.5 per cent grow to 3 per cent, maybe 4 per cent, because I guess as people who aren’t retired yet start to retire, you’ll see more retirees hold cryptocurrency in the future.”
Other research conducted by the exchange similarly found the percentage of Australians over 65 that have already invested in cryptocurrencies has grown from 2 per cent in 2017 to 4 per cent in 2019.
So why are older Australians putting their money into an asset most famous for rapid price fluctuations?
Mr Przelozny puts it down to three main factors, the first being that cryptocurrencies aren’t correlated with other assets – meaning if the price of stocks, property or any other asset were to suddenly plummet, digital coins are less likely to be affected.
The second reason is uncertainty around more conventional assets.
“Right now, interest rates are really low, the sharemarket is doing weird things, there aren’t that many places to put your money,” Mr Przelozny said.
Finally, while the crash of 2018 is still fresh in the memories of many Australians, so too are the memories of what came beforehand – capital gains on an unprecedented scale that quickly made millionaires of ordinary investors.
Aleksandar Svetski, chief executive of fellow cryptocurrency exchange Amber, similarly noted that SMSFs are buying these assets in increasing numbers.
But unlike Independent Reserve’s findings, Mr Svetski said “everybody is buying bitcoin” rather than purchasing multiple digital tokens.
“Bitcoin is literally the only option for a retiree,” he said.
“All other cryptocurrencies are correlated to bitcoin, almost 1:1, and they just represent a completely speculative, far-fetched bet that something more money-like than bitcoin will imagine – which at this point is, probabilistically speaking, impossible.”
Regulators urge caution
MoneySmart, the consumer advice arm of financial regulator ASIC, cautions would-be investors that trading cryptocurrencies comes with several inherent risks.
Chiefly among these are the prospect of hackers stealing the contents of investors’ digital wallets, the relatively small number of legal safeguards in place, and the rapidly fluctuating worth of the coins.
“Its value is based on its popularity at a given time, which is influenced by factors such as the number of people using it, the ease with which it can be traded or used and the perceived value of the currency and its underlying blockchain technology,” MoneySmart noted.
“Investing in virtual currencies is considered highly speculative, as values can fluctuate significantly over short periods of time.”
Their sudden popularity following 2017’s rapid price gains has also drawn the attention of the tax office.
The ATO now includes specific rules for how cryptocurrencies are to be assessed – both for individual investors and for SMSFs.
“Cryptocurrencies like bitcoin are not money but are capital gains tax assets,” the tax office cautioned.
“If an SMSF transacts in cryptocurrencies, SMSF trustees and members need to be aware of the tax consequences.
“SMSFs involved in acquiring or disposing of cryptocurrency must keep records in relation to their cryptocurrency transactions.”