In the most recent SMSF Adviser webcast, ‘Unlocking the future of SMSF investments with cryptocurrency’, a crypto expert said that if an SMSF is looking towards adding cryptocurrency to their investment strategy, they should be prepared to invest for a minimum of four years.
Dominic Gluchowski, chief marketing officer at CoinJar, said the returns on cryptocurrency also depend on whether the investment is made at the top of the cycle or towards the bottom.
“When it comes to duration it is a minimum of four years, and then when it comes to choice of cryptocurrencies, it’s a bit like with the stock markets – in the bear markets, it’s usually best to invest in the blue-chip stocks and when the market improves you can diversify into smaller caps,” Gluchowski said.
“Small caps are a bit more risky and it’s always best to come back to your blue chips towards the peak of a cycle.”
Tom Bennett, head of operations at Swyftx, said it is important to look at where the cycles are sitting before investing in a cryptocurrency and determine whether it aligns with the investment strategy of the fund.
“From my own experience, I’d stick with blue chips, even though in Australia we are seeing a lot of users with SMSFs divert into some of the ‘tail of alts’ [alternatives to bitcoin] now,” he said.
“For example, in this calendar year, the top-traded assets by SMSF are now some of the meme coins, so while traditionally it has been the blue-chip cryptocurrency assets that have been traded we’re seeing our SMSFs diversifying into those meme assets.”
However, he added that while a lot of users have done well with the less traditional cryptocurrencies, it is always best to research each individual asset in which a fund may be looking to invest.
“It’s also important to consider the research in light of your investment strategy,” Bennett said.
“You should look at whether you’re considering a long-term hold, or whether you’re looking at a short-term gain. A lot of these meme coins are very cyclical, and they have almost their own kind of mini-cycles within the broader market cycle, so it’s important to really understand the asset that you’re investing in. Just because it may be pumping right now may not be a reason it’s going to continue and maintain a position on the market cap table.”
