Just to be clear: many Baby Boomers are late to the Cryptocurrency Party. Many senior retirees are hesitant to get involved–especially in any kind of active trading kind of way. And for good reason. The death-defying cryptocurrency trading world seems to defy all reason. But understanding cryptocurrency and blockchain technology and their effects on the future of money (and online security, our lives and those of our loved ones, among other things) is a different story. Apparently, it’s good for your brain health.
Let’s Talk About Experience–Cryptocurrency and Brain Cells
In her post on Medium, “Why Baby Boomers Can’t Afford to Ignore The Crypto Revolution,” author Maya Middlemiss brings home the point of what experienced Senior investors bring to the table, from the wealth of their life and financial experience to their already-existing neural pathways. She emphasizes that what came out of the research on brain neuroplasticity is this that the connections between brain cells, rather than the number of cells is what matters most. Seniors win out on that.
Use It or Lose It?
The much-used phrase “Use It or Lose It” takes on new meaning when you consider what it means when trading a risky investment. Generally, one can follow the 5% Rule for any investment or holding: an investor should not allocate more than five percent of their portfolio funds into one particular security, investment or holding. For something as risky as cryptocurrency, some experts recommend only having 1-2% of it in your portfolio. But this is assuming that actively trading or holding it in your portfolio appeals to you.
Which begs the question: are there (relatively) safer ways to include it in your portfolio? One way is to think long-term and open a Crypto IRA for a small portion of your overall investment portfolio. There are several investment firms with these types of IRA accounts (most with Roth, Traditional and SEP flavors) available. But remember, you will need to consider the different methods of investing this way, and whether or not you want to hold the keys to your account (meaning, without using a financial institution that serves as the middle man) or not.
Is Staking a Good Idea?
Another investment technique that is available and not as an active trader is to explore crypto staking. Some blockchain protocols will allow you to earn additional rewards by contributing to the network in a method called “staking.” You can think of it as “staking claim” to a spot in that world. Staking is the process of actively participating in transaction validation on a proof-of-stake (PoS) blockchain. Note you must meet a minimum balance of a specific cryptocurrency to validate transactions and earn staking rewards.
What About “Inflation”?
Also good to know more about is another rewards method called “inflation.” With inflation, new tokens are added to the network and those tokens are then distributed to holders as rewards. For example, the Algorand (ALGO) asset earns rewards through inflation, or community rewards, not staking. Stellar uses a consensus protocol as well. You must hold the minimum requirement of lumens (Stellar’s currency) when inflation is run to receive the inflation amount (plus transaction fees proportional to the amount.)
Stay tuned for more creative ideas to be involved with cryptocurrency without being an active trader.
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Disclaimer: All the information provided above and on this site is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.