Technology moves fast, and millennials have learned how to adapt along with it. A generation growing up with tech, Bitcoin seems tailor-made for this savvy and growing class of new investors. Millennials are investing in Bitcoin in droves, but it’s not just the tech that’s drawing them – Bitcoin is revolutionizing finance for several reasons beyond innovation.
Investing Is Interesting Again: Growth
Many millennials came of age in a time of rock-bottom interest rates. The double-digit certificate of deposit rates of old were long gone, and savings accounts were yielding less than one percent. The idea of scraping by to put dollars away in such a low-return fund was an uninspiring concept, and socking money away into such an account resulted in a simple rainy-day fund with little to no growth at best.
Fast forward ten years and interest rates are still hovering around those levels, rewarding savers close to nothing for their efforts. Stock-picking, meanwhile, rewards only those who pick winners – while all-time-highs year after year suggest the Dow’s bull market could be getting long in the tooth.
Bitcoin comes in a form that millennials understand – technology – but it also provides an opportunity for growth. It can be invested in with spare change or cost-averaged into each month while growing from $108.58 to $29,111 over the past decade. Bitcoin is an exciting alternative to traditional investments for the tech generation – and despite its recent price increases, it looks like it may just be getting started.
Protecting Purchasing Power: Inflation
The time of rock-bottom rates was also the aftermath of the Great Recession. To save the floundering economy from its downward spiral, the Federal Reserve initiated another unprecedented tactic – printing billions of dollars each year to invest into the American economy via financial stimulation. The printing helped the stock market roar back to life but didn’t do much for main street – who, despite not seeing much economic growth, still saw inflation erode their purchasing power by around 20% over the last thirteen years.
The maddening pace of money printing – which increased during the Coronavirus pandemic – may result in inflation.
Creating an Alternative to Traditional Finance: Opting Out
All of these factors play a role in why millennials have an affinity for Bitcoin. For a generation that came of age during the real estate crash, the ensuing financial crisis with record-low interest rates and even fewer jobs, followed by money printing that pushed the stock market to high after high while those without investments watched their purchasing power decline.
On the other hand, Bitcoin is not controlled by a central party, has a hard cap on the number of coins in existence, and enables borderless transfers. Bitcoin offers a way to opt-out of the government’s monetary policy. Bitcoin offers a transparent system that anyone can view, and even take part in is a stark contrast to the opaque workings of traditional finance. Bitcoin is a revolutionary form of finance, and the transition to Bitcoin is a social revolution as much as it is technological.
Investing in Bitcoin is an attractive alternative to many investors, but despite opting out of traditional finance, there is still one thing that remains the same – taxes. For U.S. citizens, Bitcoin taxes and cryptocurrency taxes are still a reality on any capital gains made by investing in crypto. However, long-term investors have a unique advantage.
By investing in Bitcoin and other cryptos like Ethereum through a Bitcoin Roth IRA or Bitcoin 401k, investors can take advantage of crypto growth potential while avoiding capital gains taxes. Roth accounts – which are funded with post-tax money – means the capital gains withdrawn at retirement will be tax-free. If Bitcoin is a way to opt-out of traditional finance, a Roth can help investors opt-out of cryptocurrency taxes too – and keep more of their gains for their future.
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