Cryptocurrencies are characterized by volatility. The most popular currency, Bitcoin, regularly hovers around a $3000 value these days. It was less than a cent in 2010. $100 in Bitcoin in 2010 would be around $100 million today. Bitcoin Cash is a currency created from splitting the Bitcoin blockchain on August 1. It lost half its value within the first few hours of its creation. The next day, it quadrupled in price.
You would think that the above facts would deter people from investing in cryptocurrencies. But the opposite has actually happened. People are starting to look at cryptocurrencies as a more secure pension than traditional means.
Appeal to the Youth
Today’s political climate and economy are tumultuous. There’s no denying that. Every day, the stock market dives or skyrockets in reaction to breaking news that sounds more like a reality TV show script than actual reality.
Many people are tired of watching their 401(k)’s or mutual funds rise and fall in relation to cooky politics. Traditional investments don’t feel as secure as once thought to be. The 2007 recession left a stinging memory in many people’s minds of just how fragile their savings are in the hands of others. Cryptocurrencies are decentralized and free from government influence (right now, anyway). It sort of makes sense that some investors would start eyeing them for their financial future.
Unsurprisingly, younger generations, accustomed to owning digital things you can’t hold in your hands, are embracing digital currencies faster than older generations. This also makes sense when considering the economy. The discrepancy between inflation of wages and cost of living is a larger chasm than ever before. College loans, unreasonable mortgages, and the plague of unemployment have kept many millennials inside apartments or their parents’ homes longer than previous generations.
The volatility doesn’t scare them away either. Many crypto investors are hoping to place their bets in the next digital currency that blows up in value like Bitcoin or Ethereum. And while their chances may be slim to nill, the opportunity is too tempting to ignore
A New Hope for New Money
Mr. John Guarco, a 22-year-old Duke graduate, explains the appeal of cryptocurrencies: ““There’s a low cost for entry, you don’t pay a lot of fees and millennials are the most tech-savvy. [Cryptocurrency is a] safeguard against the volatility in the rest of the world.”
Gabe Wax, a 24-year-old who runs a Brooklyn recording studio, discusses his distrust of the traditional financial infrastructure: “…We have a president who knows absolutely nothing about how the economy works, and he’s appointed people who have twisted views about how it works…I don’t like the idea of money just sitting in a savings account — with the way inflation works and how low interest rates are, you’re losing money.”
“The things we’ve been able to rely on aren’t as reliable.” – Gabe Wax
Millenials are not the only ones placing their bets on digital currencies. Disillusioned with traditional investments, 35-year-old Ron Ginn quit his job at Fidelity Investments in 2008. Ron elaborates further: “It’s not investing, it’s just sticking money somewhere. The investment advisory industry has to give out watered-down, averaged-out advice. When you get into mutual funds, you lose a lot of the ability to beat the markets.” He has much more optimism for cryptocurrencies. Mr. Ginn has placed all of his investment capital into Ripple and real estate.
“It’s the wild, wild West. This is like getting to invest in the internet in the ’90s…I expect to make a couple million dollars off very little money. This is the opportunity of a lifetime.” – Ron Ginn
Pessimism or Realism?
Of course, a massive movement like using cryptocurrencies for pensions always has its share of skeptics. Many of them look no further than past Bitcoin crashes to justify their opinions. As mentioned before, volatility is usually enough to turn away lots of potential investors.
While many believe in the security of blockchains, others also point out previous hackings that have already resulted in hundreds of millions of dollars lost. Since there’s no insurance on this money, it’s lost forever. This and the natural distrust of the internet that many investors carry has deterred them from sending any money to exchanges like Coinbase or Gemini. Still, the reasons for being skeptical do not discourage most crypto enthusiasts because they believe that this movement goes beyond their own personal finance.
“The financial gain is fun, but it’s really about improving the world, improving the financial system, transparency, cost, increased speed.” – Ron Ginn
Companies and organizations cannot deny the inherent value that some digital currencies bring, either. Coins like Ethereum and Ripple have legitimate uses. Banks and organizations entrenched in traditional financial dealings are already utilizing them. These institutions know that while its form may change, value is value.
As cryptocurrencies gain more traction, more unique ways of utilizing it will emerge in just the next few years. Whether you’re betting your retirement on crypto or not putting one dollar into it, one thing you cannot deny is Mr. Ginn’s sentiment — it is the wild, wild West right now. There are plenty of opportunities abound to lose and win. If you’re going to play this game, it’s best to stay sharp and educated about current events. Check iReviews for the latest updates in cryptocurrencies.