Cryptocurrencies are usually associated with making a quick profit and using the changes in the market to earn. This is how most investors use them, or at least they did for a while when these assets first appeared.
However, cryptocurrencies can also be used for long-term savings and as retirement plans, especially now when the market is so complex and adjusted for the needs of everyday users. In this article, we’ll go over a few ways to use crypto with long-term plans in mind.
A Changing Landscape
The public attitude towards crypto has changed a lot in recent years. Experts gathering at crypto events are increasingly discussing how crypto can be included in traditional financial plans and made part of broader portfolios. It’s no longer an investment choice only considered by those interested in tech, but for risk-averse upper-middle-class investors as well.
Alongside this change in mindset, there’s also one in government policy. Tax policy is made to accommodate and encourage savings. Such efforts are now widely extended to crypto when it’s used in this fashion and often via already existing tools and policies made for fiat money.
Buy and Hold
The simplest way to use crypto with long-term plans in mind is to stick to a buy-and-hold strategy. It refers to the practice of buying crypto and holding on to it regardless of the short-term changes in the market. Even though every crypto has experienced both dips and upswings in the long run, all have risen in value over the years.
This strategy is most often used with Bitcoin and Ethereum, but it can also be used with a few other blue-chip cryptos that are the least risky.
Crypto IRA
Several platforms have already established crypto IRA accounts. These are accounts made for small yields over a long time period. Most companies already use similar accounts for fiat money. The payments are made by the employee and deducted from their salary, with the company matching the contribution.
These funds have a unique tax advantage – in that the funds are not taxed at all if they are withdrawn when the user is over a certain age, meaning when they retire. The tax benefit has long been a government policy used to encourage saving for retirement, and it has simply expanded to cover such investments made in crypto.
Staking and Passive Income
Staking allows crypto users to make passive income using their crypto assets as leverage. The users dedicate a portion of their assets to the operation of a crypto network, and in return, they are paid for their service by earning a percentage of the transactions made on that network.
The interest compounds in this way over time, which makes it a good choice for long-term savings. It’s important, however, to choose only reputable and risk-averse platforms. These are the ones that already have a base of operations, have a steady stream of users, and offer realistic interest rates. Offers that are too good to be true – usually aren’t.
Stablecoins
Stablecoins are unique blockchain assets that came about as a way to address concerns of crypto volatility. The value of stablecoins is tied to the value of a fiat currency in a one-to-one ratio. This means that they aren’t as volatile as cryptos but have all the same features in terms of making fast and anonymous payments.
Some feel that stablecoins aren’t a true crypto asset, as they don’t provide a way to break free from traditional finance. That’s why some investors use it as a part of a broader portfolio, as a hedge against crypto volatility.
Dollar-Cost Averaging
Dollar-cost averaging is an investment strategy in which a user always invests a fixed amount into crypto assets, regardless of the state of the market at the time when the investment is made. Such an approach to investing allows the investor to hedge against the changes and swings of crypto value.
Investors should simply choose an amount they plan to invest in and choose the time interval in which to do it, and they should continue with such efforts regardless of the dips in the market. The key is not to get discouraged by short-term changes.
To Sum Up
Cryptocurrencies can be used to make long-term investment savings, and many are already using them in this fashion. The tax policies made to induce long-term savings and planning for retirement have been expanded to include such efforts made using cryptocurrencies as well.
There are several strategies one can employ in order to use crypto for savings. All of them depend on choosing the right currencies and platforms and having a long-term view in mind when making decisions. As is the case with any other investment plan, there are risks involved, and the investors should prepare for them.
Comments