Saving for retirement in bitcoin? A former Biden advisor says don’t

Bitcoin is failing proof of payment test.
Bitcoin is failing proof of payment test.
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Since Boston-based retirement plan provider Fidelity announced last month that it would allow bitcoin investments in 401(k) accounts for 23,000 companies, there has been increased interest in ‘how to add bitcoin to your retirement account.’

Fidelity said it will allow its 20 million participants—accounting for $2.7 trillion in assets—the opportunity to invest in bitcoin through their retirement accounts later this year.

Is it practical? If yes, is it a good idea? Cryptocurrencies are known to be the most volatile digital assets and pegging your entire retirement benefits on them requires a deep understanding of the enormous changing trends in the global crypto market. In the past one month alone, $800 billion in valuation has been wiped off the market in a recent crypto crash.

In the past few years, the crypto investing frenzy has gone entirely against the original principles of cryptocurrency blockchain systems such as decentralization and immutability. Most bitcoins are still held by ‘whales’—someone with large amounts of bitcoin—and institutional investors.

Mainstream crypto has promised to ‘democratize’ a lot of things but in reality, the wealthiest 82 individual crypto wallet holders account for almost 15% of the total supply of bitcoin, according to River Financial, a San Francisco based financial services firm.

Anonymity in the crypto world makes it a risky one

Due to the pseudo-anonymity of players in the crypto world, it has a high potential for scams, rug pulls, and other types of dishonest tactics. That means if you choose to commit your funds to an individual retirements account (IRA) provider, you will need to vet them properly first.

Quartz spoke to former President Joe Biden’s senior advisor, Moises ‘Moe’ Vela,  who serves on the TransparentBusiness Board of Directors, which launched crypto token Unicoin. He talks about the current crypto crash, crypto retirement plans, and the future of finance.

What do you make of the current crypto crash? 

It was inevitable, given that traditional cryptocurrencies have no backing by any assets. There is need to think of creating cryptos that address the high volatility of digital currencies. Cryptocurrencies backed by no assets have the perceived value only and even a single tweet from influencers like Elon Musk can affect their valuation greatly.

What is your take on using bitcoin for retirement plans?

Retirement plans should focus on more stable investments. Few retirees are willing to rely on non-asset currencies which can lose their entire value. Equity-backed, dividend-paying cryptocurrencies are safer choices. For crypto to become reliable for retirement investments, a change is needed. It shall rely on an extensive portfolio of growing assets, such as equity in emerging growth companies. Unicoin is bringing back “the gold standard” using equity in emerging growth companies as the superior kind of assets: gold does not grow while a good equity portfolio does.

What would you say about the stability of stablecoins?

Stablecoins provide questionable stability, as we all discovered in the current market slump. And they provide no return on investment opportunity as their value would not increase over the US dollar or other fiat currency they are tied to. The combination of these two factors makes them a very questionable investment option.

Countries like El Salvador and the Central African Republic are now using bitcoin as their official currency. Your thoughts?

I see it as an irreversible trend. Cryptocurrencies will successfully compete with fiat currencies and governments will have to recognize and regulate them. Decentralized finance is a part of the future of finance. Decentralization has its advantages and disadvantages. Decentralized cryptocurrencies, for example, cannot do significant branding because not everyone on the blockchain can see all nodes and therefore difficult to scale. But the cons on transparency remain.