When the price of a single Bitcoin rose from under $1,000 to more than $19,000 in December of 2017, cryptocurrency quickly became a household name. What was once an obscure investment held by only the most hardcore devotees suddenly entered the mainstream, and since then, thousands of other cryptocurrencies have been minted. As cryptocurrencies gained notoriety around the world, the price of Bitcoin experienced a series of violent ups and downs, causing some investors to make millions while others lost everything.
Today, with Bitcoin prices hovering at nearly $60,000, many experts are concerned that cryptocurrency is in a bubble which could have serious repercussions for investors worldwide if it were to burst. Cryptocurrency investors would not be the only group affected by a crash; a sudden drop in the price of Bitcoin could have a serious ripple effect that devastates millions of other investors. As retirement phase experts, the team at Crash Proof Retirement® is keeping a close eye on Bitcoin and other cryptocurrencies. Here is our take on the cryptocurrency bubble, and what it could mean for today’s retirement investor.
What is Cryptocurrency?
Unlike traditional money, cryptocurrencies are digital and generally not issued by a central bank or government. Instead, they exist on a network of computers that span the globe. Just like an accountant would use a ledger to keep track of transactions, cryptocurrencies use a decentralized ledger technology known as blockchain, to digitally verify transactions and track their balances around the world. Because of the decentralized nature of cryptocurrencies, they are very difficult for governments to manipulate and regulate which has caused several countries to either ban or discourage their use. We could spend all day describing how these digital currencies work and what gives them value, but if it all sounds a bit confusing to you, you are not alone.
How Does Cryptocurrency Affect Your Investments?
Everyday investors are often baffled by cryptocurrencies, and even those who invest in them may not fully understand how they work, or their implications in the larger investing world. This could be one of the contributing factors leading some experts to believe that the cryptocurrency market is in a bubble. Early cryptocurrency adopters bought their coins at very low prices — fractions of a penny in most cases. As more and more investors jumped on the bandwagon, prices rapidly increased. When Bitcoin first hit $19,000, many of those early adopters sold off their holdings, making a fortune in the process. Other investors saw greater potential for Bitcoin, encouraging their peers to hold out for even larger gains. While the first selloff decreased the price of Bitcoin, the cryptocurrency has since recovered and reached new record highs thanks to an army of new investors who caught the cryptocurrency bug.
Of course, the lure of making a quick fortune can be irresistible to many investors, especially those who are looking to increase the value of their retirement assets. Bitcoin proponents have encouraged newer investors to hold onto the currency, much in the same way that an investor would take a long position on a traditional stock. This strategy has caused the price of Bitcoin to skyrocket, but how much longer will cryptocurrency investors be able to resist the temptation to sell? Bitcoin holders are bound to sell eventually, and when they do, it will likely create waves in the traditional currency market which may ultimately send ripples throughout the world, impacting global stock exchanges.
A crash in Bitcoin prices, or in the overall cryptocurrency market has the potential to ignite a stock market crash that could devastate retirement accounts. Additionally, more governments and central banks are investigating ways of creating their own digital currencies, such as the digital dollar. In response, the lure of digital currencies like Bitcoin could quickly diminish and potentially wipe billions of dollars off the market. If your retirement savings include risky securities-based investments like cryptocurrency, you could lose everything if the bubble bursts. We cannot predict what will happen to cryptocurrency prices in the future, or to the stock market, but one thing is certain: taking your money out of high-risk securities-based investments and transferring your nest egg into safer financial vehicles will protect your savings from the volatility and uncertainty of domestic and global markets.
At Crash Proof Retirement®, we have spent decades educating investors in or near retirement about the potential dangers of the securities industry. To date, we have helped more than 5,000 retirees protect their accounts and gain peace of mind using the Exclusive Crash Proof Retirement® System. Our proprietary Crash Proof Vehicles allow consumers to receive credited interest returns that beat inflation, eliminate market risk and fees, and prevent investors from losing a single penny during a stock market crash. If you are concerned about cryptocurrencies and the future of the stock market, call 1-800-722-9728 or visit crashproofretirement.com to find out more about how the Exclusive Crash Proof Retirement® System can protect your nest egg from the Bitcoin bubble.