By Craig Erwin, Ph.D.

Photo By Wesley Carvalho On Pexels.com
Investopedia surveyed 4000 people and found that millennials own as many cryptocurrencies as stocks. Survey results showed that 38% of millennials own crypto and 28% plan to use crypto to help fund their retirement. But most surveyed don’t know much about cryptocurrency, including how it works, how to buy and sell it, and whether there is something backing up cryptocurrency, like U.S. treasuries are backed by the “full faith and credit” of the U.S. government. The fact is that nothing backs up cryptocurrency; it only has value because some people think it has value. If everyone decides it’s worthless, that’s just what it will be. Unlike stocks, it doesn’t have property, plants, equipment, earnings, and dividends giving it intrinsic value. The difference between buying crypto and buying stocks is like the difference between buying a virtual house in the metaverse and buying a real house that you can live in, built of wood and bricks. Which is worth more?
Where do those who were surveyed about cryptocurrencies get investing and financial information? 47% use internet searches and 40% use YouTube. The survey also found that, even though those surveyed believe there is a Bitcoin bubble, they still want to buy cryptocurrency. It appears that they have FOMO, the fear of missing out. Even though they believe Bitcoin is overvalued, they want to buy cryptocurrency because they don’t want to miss out on the next cryptocurrency to skyrocket in price. Of course, it’s pretty unlikely that they will buy the right cryptocurrency because there are over 10,000, with new ones created every day. Many will buy a cryptocurrency that a “crypto expert” recommends only to see its price plummet to zero. We have seen this movie before. In the 90’s many of us bought strongly recommended dot-com stocks with huge upside potential whose prices eventually plummeted to zero.
Much like during the dot-com craze, there are cryptocurrency newsletters, analysts, and journalists. There is a stream of articles and videos on why cryptocurrency is perfect for a retirement portfolio. Even some reputable financial information sources such as Barron’s, and Yahoo Finance now regularly publish articles about cryptocurrency, perhaps because they too are worried about missing out.
A publication called CoinJournal (ConJournal may be more fitting) claims that “as crypto continues to become a more mainstream asset”, it makes more and more sense to save cryptocurrency for retirement. Here are other reasons CoinJournal offers for putting crypto in retirement portfolios: “(1) cryptocurrency has seen widespread growth and adoption in the past decade (2) cryptocurrencies have outperformed traditional retirement assets over the past decade by a huge margin and (3) the cryptocurrency market is too big to fail and will be a reliable source of returns in the long run.” Do these claims sound like facts or hype? Too many cryptocurrency articles make liberal use of the word “huge” to describe the future of cryptocurrency and cryptocurrency returns.
It reminds me of the hype common during the 1990’s dot-com bubble and the Roaring 1920’s, when the stock market boomed, fueled by hype, and then came crashing down violently. CoinJournal notes that, although many think Bitcoin is the ultimate cryptocurrency for retirement portfolios, there are better choices because Bitcoin has nearly reached its potential. CoinJournal then provides a list of cryptocurrencies that could be huge in the future. I have only heard of two of the picks.
No one knows how the cryptocurrency craze will end, but, as usual, with any hot, new, speculative investment, although a few people may become fabulously wealthy, as in a lottery, most will end up with nothing. Make sure you are not one who gets burned, especially if you’re saving for retirement. Better buy something with intrinsic value, such as stocks, bonds, and real estate.
Do you own cryptocurrency? If so, did you buy some of it to prepare for retirement? How confident are you that your retirement portfolio will be sufficient?
For more information on cryptocurrencies, Bitcoin, stocks, and retirement, click on the following links:
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