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Sound financial planning or gambling with the future?

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In April, United States-based retirement plan provider Fidelity Investments moved to allow 401(k) retirement savings account holders to invest directly in Bitcoin (BTC), the flagship cryptocurrency, making crypto a potential part of one’s savings for the future.

A 401(k) is a retirement savings plan offered by many U.S. employers that give the saver tax advantages and allow for several different investment options. Fidelity’s move will make it easier for Bitcoin to be among those options.

In a typical 401(k) plan, employees agree to have a percentage of each paycheck paid directly into an investment account created for the plan, while employers often match part or all of the employees’ contributions.

Fidelity is the largest retirement plan provider in the United States, and its BTC rollout will make the cryptocurrency available to more than 40 million employees — assuming their employers decide to offer it. Investors who take advantage of the initiative could effectively become tax-advantaged long-term BTC hodlers removing coins from circulation every month.

The company’s plan limits BTC allocations to a maximum of 20% and allows companies to make the threshold even lower. Offering cryptocurrency options for 401(k)s isn’t new, however. In June 2021, another retirement plan provider, ForUsAll, partnered with Coinbase to offer BTC exposure to its account holders.

ForUsAll even recently filed a lawsuit against the Department of Labor and Secretary of Labor Marty Walsh in the United States District Court for the District of Columbia, seeking the withdrawal of a compliance assistance release.

The release states that the department’s Employee Benefits Security Administration will “conduct an investigative program aimed at” 401(k) plans that include cryptocurrency. Speaking to Cointelegraph at the time, ForUsAll CEO Jeff Schulte said the government was “trying to restrict the type of investments Americans can choose to make because they’ve decided today that they don’t like a certain asset class.”

Questions of government overreach aside, it’s also important to consider whether including crypto assets in a retirement plan is a good idea. The Bitcoin network has been around for over a decade and has outperformed every other asset class so far, but as any analyst will say, past performance does not guarantee future results.

Crypto volatility and 401(k) plans

Considering that Bitcoin and crypto assets in general are recent financial experiments only a little over a decade old, some investors may find digital currencies too risky. Cryptocurrencies can be highly volatile, and their value has been known to plunge by up to 80% during bear markets — something that could prove disastrous ahead of someone’s retirement.

While employees aren’t forced to withdraw from their 401(k) plans when they retire, the point of the money being there is to provide them comfort during their sunset years. Waiting for the market to recover or simply accepting such significant losses could be devastating.

Recent: Is education the key to curbing the rise of scammy, high APY projects?

Chris Kline, co-founder and chief operating officer of Bitcoin IRA — a cryptocurrency-focused individual retirement account provider — told Cointelegraph that there is a “growing conversation around the adoption of digital assets and their growing use case.”

Kline pointed to Senator Tommy Tuberville from Alabama, who recently unveiled a bill, the Financial Freedom Act, that seeks to allow Americans to add cryptocurrency to their 401(k) retirement savings plans.

According to Kline, part of the “retirement crisis we have in this country [the U.S.] is due to a lack of participation in 401(k)s.” He added that such moves could be a way to get newer generations engaged through their employer-sponsored plans and help Americans retire while testifying to the resilience and relevancy of crypto assets. Kline added:

“Crypto is certainly volatile, but its resiliency and relevancy in its short existence are remarkable. Having at least some exposure — and more importantly, experience in crypto — is becoming paramount to modern investing.”

Cryptocurrencies could have the same disruptive impact on money that the internet had on communications or that email had on post offices, Kline stated.

Speaking to Cointelegraph, Scott Melker, a cryptocurrency influencer and the host of the Wolf Of All Streets Podcast, noted that every investor should have “at least minimal exposure” to Bitcoin, with Ether (ETH) a second possibility worth considering.

According to Melker, even a small allocation in these assets potentially offers “idiosyncratic risk and the opportunity to invest in an asset [that] can go up when everything else is dropping.” Melker added that crypto markets crashing ahead of retirement might not be the biggest concern, saying:

“Any market can crash ahead of retirement, so this is not a concern specific to Bitcoin. Investors in tech stocks right now are largely underperforming crypto in their retirement accounts.”

Melker added that investors should be allowed to invest in any asset they prefer for their retirement, concluding that while self-directed IRAs are “popular for this reason,” 401(k) holders haven’t yet had such an option.

A volatile asset class for diversified portfolios

Over the past few years, more and more people have come to consider cryptocurrencies an investable asset class, with demand clearly present for retirement savings. In a survey conducted by Investopedia, one in four millennial respondents reported that they are already using crypto to help fund their retirement goals.

Employers, however, still have their doubts. The Plan Sponsor Council of America recently surveyed its members, which are employers sponsoring qualified savings plans, and asked whether they are considering adding crypto to their investment options. Only 1.6% responded affirmatively.

Sculpture of a bear and a bull on a seesaw, representing the changing markets, in front of Fross and Fross Wealth Management office in The Villages, Florida. Source: Whoisjohngalt.

Speaking to Cointelegraph, Daniel Strachman, managing partner at A&C Advisors and an independent trustee of the Arca U.S. Treasury Fund, said that cryptocurrencies are nevertheless “something that a diversified portfolio should include.”

According to Strachman, an individual’s level of exposure to crypto assets should depend on several factors, including age, income, other assets and more. To him, it’s “all about investor education,” as there “needs to be significant information, content and educational programs available to investors, regardless of the size of their assets.”

Cameron Collins, an investment analyst at Viridi Funds — a company offering crypto and clean energy investment solutions — echoed Strachman. He told Cointelegraph that sound cryptocurrencies like Bitcoin “are great investments and deserve a place in 401(k) plans.”

According to Collins, memecoins and scam tokens with “no fundamental value” do not deserve a place in these types of investments, and policymakers — along with investors and plan administrators — should be made aware of this important caveat.

Cryptocurrencies, he said, offer “extreme upside potential” but lack investor protection, which can be a significant drawback. The upside potential may, however, be all an investor needs.

Giving prudent managers more opportunity

Having more options to invest across different assets, including cryptocurrencies, may give a prudent manager “more opportunity to optimize that long-term rate” of return, according to Thomas Perfumo, head of business operations and strategy at crypto exchange Kraken.

Speaking to Cointelegraph, Perfumo noted that retirement is often associated with low risk, but “This heuristic misses the market,” as $1 compounding over 30 years at an 8% rate will grow to surpass $10, while that same $1 compound over 30 years at a 6% rate grows to $5.74.

According to Perfumo, optimizing that rate of return over the long run is “how an individual builds wealth, overcomes the burden of inflation and ultimately accrues enough to retire comfortably.”

Perfumo added, “Risk tolerance evolves over a person’s lifetime. Someone closer to retirement, who may already have a significant amount of savings, will likely have a lower allocation to risk-on investments like cryptocurrency.”

He added that conversely, individuals at the start of their careers have “more capacity to take on risk and will likely allocate more of their capital towards risk-on assets.”

Recent: A life after crime: What happens to crypto seized in criminal investigations?

The potential downsides to adding crypto to retirement investment plans, Perfumo said, involve fiduciaries failing to “act in their clients’ best interests by rushing into a risky product or misallocating their clients’ capital relative to their risk profiles.”

On the other hand, someone who wishes to manage a self-directed retirement portfolio “should have all available options at their disposal, so long as they are informed of the risks.”

Adding cryptocurrencies to 401(k) plans means adding tax-efficient investment opportunities for investors looking to hold onto their assets for an extended period of time. As with any other financial decision, the choice should be adapted to investors’ risk profiles and should only be made after thorough research and help from advisers if necessary.

Cryptocurrency investments do not match everyone’s risk profile, nor should they. They are voluntary, but they may be highly beneficial to investors who thoroughly understand the risks involved.

Source link: https://cointelegraph.com/news/crypto-401-k-sound-financial-planning-or-gambling-with-the-future

BTC price approaches $32K as analyst warns of ‘boring’ summer for Bitcoin

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Bitcoin (BTC) retained new higher levels at the June 6 Wall Street open after BTC/USD snapped a nine-week losing streak.

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

Stocks could take BTC as high as $37,000

Data from Cointelegraph Markets Pro and TradingView followed the largest cryptocurrency as it circled $31,500 on the back of 6% daily gains.

The start of Wall Street trading provided further support to bulls as United States equities headed higher. The S&P 500 traded up 1.4% at the time of writing, while the Nasdaq Composite gained close to 2%.

For popular social media analyst Wolf, Bitcoin’s correlation to stocks could see further upside should the S&P 500 flip its 21-month exponential moving average (EMA) to support. 

“$SPX sitting on the monthly 21EMA, should it hold, we will see $BTC recover to the same band now at $36–$37K,” he summarized to Twitter followers on the day.

A further post described BTC as “lagging” behind the S&P but apt to “recover pretty soon” in the event of the former holding monthly support.

Cointelegraph contributor Michaël van de Poppe was also more optimistic after $30,000 held overnight on BTC/USD.

“A nice move of Bitcoin overnight, as we held the area around $29.7K and continued to run,” he explained.

“Resistance zone now, wouldn’t be longing around here (might even sweep above $31.8K to take the liquidity). Looking at around $30.5K for a potential new long and then targeting $32.8K.”

Fellow trader Pentoshi, nonetheless retained a conservative outlook, forecasting a reversal for the S&P, which could well deflate the latest momentum in crypto markets.

On longer timeframes, the mood was thus subdued in the face of ongoing monetary tightening by central banks and rampant inflation.

For commentator Bob Loukas, the summer looked to be uninspiring for hodlers.

“Probably going to be a boring summer in Crypto. The heavy selling is done, now it’s the doldrums period where only smart money accumulates,” he acknowledged.

“Once all the weak hands have turned over, higher prices will be needed, and the new cycle can begin. Still targeting late in year.”

Analyst on altcoins: “Worse can get much worse” 

Some major altcoins, meanwhile, took the opportunity to capitalize on Bitcoin’s gains.

Related: BTC price snaps its longest losing streak in history — 5 things to know in Bitcoin this week

Among them was Ether (ETH), the largest altcoin by market cap, which saw daily gains in excess of 7% to pass $1,900.

“Good momentum on $ETH here,” Van de Poppe commented in a separate update.

“Approaching [the] first point of resistance, but given the HL and the current recovery on $BTC, I think we’re up for a few weeks of green in which we’ll be looking for tests around $2,300–$2,500 on $ETH too.”

ETH/USD 1-hour candle chart (Binance). Source: TradingView

Elsewhere in the top ten cryptocurrencies by market cap, Cardano (ADA) and Solana (SOL) both jumped an excess of 10% on the day. 

Out of the top fifty tokens, only one, Elrond (EGLD), traded in the red.

Loukas, nonetheless, noted that Bitcoin’s market cap was apt to cost altcoins big in the coming months. 

“With BTC maybe 3–6 months from $USD bear lows, watch out on ALT positions. Worse can get much worse,” part of a tweet warned.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Source link: https://cointelegraph.com/news/btc-price-approaches-32k-as-analyst-warns-of-boring-summer-for-bitcoin

Is Cardano ready for a go at $1? June’s hard fork FOMO lifts ADA price to weekly highs

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Cardano (ADA) was among the best performers among the top cryptocurrencies on June 6 as traders assessed a key upgrade that promises to enhance its blockchain’s smart contract capabilities.

Vasil hard fork FOMO

Dubbed “Vasil,” the so-called hard fork event will tentatively take place on June 29, 2022. As a result of the euphoria surrounding this upgrade, traders have started speculating more on ADA’s upside prospects, resulting in its better performance than other top-ranking digital assets.

For instance, ADA’s price rose by over 14% to $0.64 on June 6 compared to the 6% gains of its top rival, Ether (ETH), on the same day.

Cardano’s price history also shows similar euphoric behaviors among traders in the days leading up to hard fork events. For example, the “Alonzo” upgrade in September 2021, which introduced smart contract functionalities to the Cardano network, preceded a 200%-plus ADA price rally, as shown below.

ADA/USD daily price chart. Source: TradingView

Similarly, Cardano’s “Mary” hard fork in March 2021 preceded ADA’s 1,600%-plus price boom.

ADA bull traps

The previous price rallies that led to the hard fork events also occurred amid an expansionary macro-environment. At the time, interest rates were near-zero, and the Federal Reserve was buying $120 billion worth of government bonds every month.

But currently, the U.S. central bank has turned hawkish after witnessing persistently higher inflation. Therefore, many analysts argue that there is now less U.S. dollar liquidity to buy riskier assets, including stocks and cryptos.

Cardano has reeled under the pressure of the Fed’s tightening, with ADA trading almost 80% lower than its September 2021 peak of $3.16. The broader move downside also includes significant bounces, as shown in the chart below.

ADA/USD daily price chart featuring price rebounds in ongoing bear market. Source: TradingView

ADA price to $1?

From the technical perspective, ADA now tests a resistance confluence comprising a falling trendline and its 50-day exponential moving average (50-day EMA; the red wave) near $0.66 and a horizontal trendline (the neckline) near $0.62 that constitutes what appears to be a “double bottom” pattern.

ADA/USD daily price chart featuring ‘double bottom’ setup. Source: TradingView

A break above the resistance confluence could trigger the double bottom breakout.

Related: Crypto funds under management drop to a low not seen since July 2021

As a rule of technical analysis, traders measure the double bottom’s breakout target by adding the distance between the bottom levels and the neckline to the breakout point. That paints a June target of  $0.87, up around 40% from June ‘s price and likely ahead of the Vasil upgrade.

A follow-up rally could also see ADA testing its 200-day exponential moving average (200-day EMA; the blue wave) near $1 for a breakout or pullback. A pullback seems more likely, however, given the prevailing macro risks.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.