2021 was a pivotal year for crypto. While cryptocurrencies and other digital assets have been around for more than a decade now, 2021 could just be the year crypto entered the hyper-adoption phase.
As a quick crypto 2021 review:
- Institutional investments poured into the crypto space, to the tune of $9.3 billion just last year.
- El Salvador became the first country to recognize Bitcoin as legal tender.
- Bitcoin reached $1 trillion in market capitalization, making it the fastest asset to do so.
- The Federal Reserve stated it had “no intention” to ban crypto (as countries such as China did the opposite).
- The SEC approved the first Bitcoin futures ETF.
- Of those Americans who’ve invested in crypto, 70% started investing in it last year.
This is not meant to be a 2021 crypto review, however. Rather, we thought we’d do something a little different. So today, we’re looking at the top three cryptocurrency myths proved wrong in 2021.
Crypto Myth #1: It Can’t Be Traced
Depending on your point of view, the anonymity built into cryptocurrencies such as Bitcoin is either its greatest feature or biggest flaw. To privacy advocates and those concerned about government overreach, crypto represents a much-needed improvement over the traditional financial system, allowing movements of money to remain anonymous, even from governments.
But to critics, this same anonymity is a recipe for illicit activity. While it’s certainly true crypto has been and continues to be used for nefarious purposes, analysis shows the percentage tied to criminal actions is steadily declining. (The same research also found that a greater percentage of traditional, fiat currency is used for illegal purposes.)
More importantly, it’s getting much harder for bad actors to use their ill-begotten funds. Crypto wallets may be anonymous, but the transactions themselves are recorded publicly on the blockchain, making it increasingly difficult to use stolen funds. As the expression goes: Follow the money.
Consider the Colonial Pipeline ransomware attack that temporarily shut down vital oil lines along the Eastearn Seaboard last May. Within weeks, the FBI had seized a large portion of the ransom payment simply by following the transactions to a compromised wallet.
At the time, it was shocking to many in the crypto-community. A year on, however, and the FBI and other law enforcement agencies are becoming increasingly successful at recovering stolen funds. Just last month, federal agents gained control of more than $3.6 billion in stolen Bitcoin.
As Kim Grauer of blockchain research firm Chainalysis recently explained on NPR’s Planet Money podcast, “You can forever see every transaction that ever happened, and if law enforcement decides they want to investigate it, all they have to do is subpoena an exchange used to convert the funds and get the identity behind the person.”
Clearly, crypto is much more traceable than many adherents would have liked to believe.
Crypto Myth #2: NFTs Are Only for Crypto Natives
It seems that just about every day a celebrity is debuting a new NFT collection. Some artists, like DJ Steve Aoki, are even finding a single NFT drop can bring in more money than years of music royalties. (How crypto and NFTs can revolutionize the music business is a topic for another day.)
That’s pretty astounding when you consider that just a year ago, few people had ever heard of NFTs, despite having been around since 2014. Like Bitcoin itself, non-fungible tokens (NFTs) were for years embraced by just a handful of early crypto adopters.
So crypto natives would be forgiven if on January 1, 2021, even they thought NFTs would remain in relative obscurity. A few prescient others, however, made bold predictions that 2021 would be the Year of the NFT. And a quick Google Trends comparison between the terms “Bitcoin,” “crypto,” and “NFT” shows just how right they were.
Data source: Google Trends
Prior to March 2021, search volume for NFTs was almost non-existent compared to that of crypto and Bitcoin. By the end of the year, more than $40 billion had been spent on NFTs, the vast majority of it in the last five months of 2021. Clearly, NFTs, which now rival the traditional global art market, are no longer just for crypto natives.
What Are NFTs?
In case you’re new to the world of crypto, non-fungible tokens (NFTs) are essentially unique digital assets for which there is no one-for-one replacement. Sales of NFTs, like crypto transactions, are logged on the blockchain, thus making it possible to verify that an NFT is unique.
Crypto Myth #3: It Doesn’t Belong in Retirement Accounts
Today, most managed retirement plans consist of about 60% stocks and 40% bonds, as they have for decades. A lot has changed over that time, though, and savvy investors—taking their cues from ultra-wealthy and institutional investors—are increasingly looking beyond the public markets to diversify their portfolios.
There are three primary reasons for this:
- The public markets can’t guarantee the returns they once provided.
- The public markets are shrinking as companies wait longer to go public, if at all.
- The public markets can’t provide true portfolio diversification.
Self-directed IRAs allow you to invest in assets you won’t find with more conventional, “legacy” retirement account providers—in turn, spreading your risk while also tapping the potential for outsized returns. And with all the same tax advantages of any other traditional or Roth IRA.
You might, for example, choose to invest in a pre-IPO company. Or real estate, farmland, or securitized fine art. You might even want to invest in crypto using an IRA.
In fact, a survey by the investment firm Capitalize found that 60% of employees want to hold crypto in their employer-sponsored retirement plan. The reason? They, like a growing number of institutional investors (as discussed earlier), see digital assets not as a means to quick gains, but as long-term investments.
When you factor in the stellar performance of crypto to date—between 2009 and 2019, Bitcoin grew by almost 9,000,000%—it’s understandable that people would want crypto in their retirement accounts.
Just keep in mind the old adage: Don’t put all of your eggs in one basket. Because every investment comes with risk, whether it’s crypto, stocks, bonds, venture capital, and so on. And that’s where Alto comes in. Alto allows you to diversify your portfolio in ways most of the legacy retirement account providers do not.
Invest in Crypto Tax-Advantaged with an Alto CryptoIRA®
Now that we’ve covered the top crypto myths, you might be thinking, “I’d really love to start investing in cryptocurrencies, but I’ve heard crypto taxes are a nightmare.” Or maybe you’re already investing in crypto for your future but would like a more tax-efficient way to do so.
With a CryptoIRA at Alto, you can buy and sell more than 135 coins and tokens tax-free or tax-deferred, depending on the type of IRA account you set up. (Assuming, of course, that you wait until you’re eligible to take distributions.)
What’s more, unlike many other crypto IRAs, you don’t need a lot of money to get started with Alto CryptoIRA. At Alto, our mission is to make investing in alternative assets—like crypto, real estate, securitized art, fine wines, startups, farmland, and more—something everyone has access to. That’s why we offer low, $10 investment minimums and no monthly account fees.
Ready to dive into the world of crypto investing? Open your Alto CryptoIRA account for free today and discover what could be the best way to buy and sell crypto.