Cryptocurrency is becoming popular among a certain section of Gen Z and millennials looking to invest in digital assets. As this trend continues, it is critical to assess whether it is a safe investment avenue even if you have the financial power and risk tolerance, especially if you are a senior citizen.

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What is Cryptocurrency?

Before considering whether it is a good or bad choice for seniors, it’s vital to have a basic understanding of these digital assets. Cryptocurrency is a type of digital money used in online transactions. Its value is determined by the market demand that fluctuates daily. These virtual assets offer an investment option but come with various risks, including market volatility.

Some popular cryptocurrencies include Bitcoin, Ethereum, Tether, and Solana. These digital currencies are not regulated by a central authority, like the central bank, so there is no control of the government. Instead, each cryptocurrency has a unique blockchain network where the users of that particular crypto share.

Should Seniors Invest in Cryptos?

Lately, cryptocurrencies have become a popular investment tool among some investors in India looking for opportunities to diversify and increase profits. Cryptocurrencies could be an option for seniors with extra income and higher risk tolerance due to their unique advantages. With easy access to online trade and growing demand, cryptos may have the potential for significant returns in a short period.

However, it’s important to recognise that cryptocurrencies are still a relatively new and volatile asset class. While some early investors have seen substantial gains, not all cryptocurrencies perform well. Before investing, seniors should carefully evaluate their financial goals and risk tolerance.

Says Anuj Chaudhary, Cardano Blockchain Lead, India, “Senior investors don’t go through whitepapers and tokenomics and have limited knowledge about decentralised finance. They could prefer to take assistance from staking platforms and follow a dollar-cost-averaging (DCA) strategy. They can explore blue-chip virtual digital assets (VDA).”

Chaudhary adds that investors can start by allocating 5 per cent of their overall investments using VDA SIPs (Systematic Investment Plans) and can earn “staking rewards from proof-of-stake blockchain coins, namely Ethereum and Cardano.”

Risks and Challenges

Cryptocurrencies come with several risks and challenges that investors should be aware of. Market volatility is a significant concern, as the price instability of cryptocurrencies can lead to substantial profits or losses. Additionally, regulatory uncertainty poses a risk, as digital currencies’ legal status and regulatory framework can change. Security issues are also a concern, such as risks from hacking, scams, and possible loss of private keys. Investors need to understand these potential risks before diving into the crypto world.

What Seniors Should Do?

Senior citizens thinking about investing in cryptocurrencies should do thorough research on digital currencies, the market and the regulatory aspects before investing. They should have a clear plan, including how much to invest and when to sell, and should avoid making impulsive decisions. They should be prepared to lose money and should only invest a small percentage of their wealth.

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It is important to stay updated on market developments and monitor the performance of their investments regularly. They should only invest in cryptocurrencies if they have extra money and high-risk tolerance, ensuring the investments complement their overall financial strategy. Consulting with a financial advisor may be helpful.

Anuj adds, “Seniors should understand the four-year cycle of the crypto trend. As we have already entered the bull cycle, they can enter the market in tranches or hold their investments for at least four years. They should understand they can see 70 per cent to 80 per cent sell-off trends in the market quarterly. To avoid the complexity, they can also start their crypto journey with exchange-traded crypto funds.”