Retirees ride the cryptocurrency investment wave

A recent report by ABC News tells the story of a retired Brisbane couple who invested in the high-risk and volatile asset of cryptocurrency, Bitcoin to be precise. They came away winners, having turned a $48,000 investment in Bitcoin into a half-million-dollar windfall. 

The ABC News article suggests that the couple could be part of a small but growing number of senior Australians turning to crypto in a high-risk attempt to boost their retirement savings. 

“We don’t tell most people our age that we are doing crypto,” Justine Sanders, 79, said.

“The few that we told thought we had absolute rocks in our heads.” 

It’s difficult to know how many older investors are attracted to cryptocurrencies. The article quotes an industry source estimating as many as 6.5 million Australians have invested in the volatile digital currencies. 

The source, an online investing platform, said “ownership rates among baby boomers had quadrupled over the past six years”. 

Its latest annual survey of 2,000 people found the number of Australians aged over 65 who had owned crypto increased to 8.2%, albeit from a low base of 2% in 2019. 

The number of respondents with self-managed super funds who said they would like to invest in Bitcoin doubled during the same period. 

The Australian Tax Office (ATO) is advising cryptocurrency investors it will be especially interested in their investments this tax year. 

Last year, the ATO directly contacted around 100,000 taxpayers who had traded in cryptocurrency and prompted 140,000 taxpayers at the time of lodgement. 

Mr Loh explained that gains from cryptocurrency are similar to gains from other investments, such as shares. Generally, as an investor, if you buy, sell, swap for fiat currency, or exchange one cryptocurrency for another, it will be subject to capital gains tax (CGT) and must be reported. 

The price of Bitcoin, which is the oldest and most popular cryptocurrency, has increased from $5,000 in 2019 to about $170,000, with booms and busts along the way. 

Donald Trump was once a crypto sceptic. Now his re-election has sent the volatile price of Bitcoin sky-high. 

Some people have become rich, but for every success story, there has been a cautionary tale about people "getting wrecked".  

According to the Australian Securities and Investments Commission (ASIC), cryptocurrency is a “very high-risk” investment. 

The article suggests that the Brisbane couple are part of a small but growing number of seniors turning to crypto in a risky attempt to boost their retirement savings.

“You might get lucky, but you might also lose a lot of money very fast,” ASIC commissioner, Alan Kirkland, said. 

While most seniors were investing a modest amount, some pensioners are reportedly withdrawing from their super to bet on crypto. 

The ABC article quoted “self-styled crypto coach” Sydel Sierra who runs an online consulting business that advises would-be investors, including the retired couple already mentioned. 

“It has a very low barrier to entry,” she said. “Anyone with a laptop or a computer and an internet connection can get involved.” 

Businesses like Ms Sierra’s that provide advice on cryptocurrency investments are not required to hold a financial services licence. That is because cryptocurrency is not classified as a financial product under Australian law. 

The 36-year-old said she surveyed her 700 clients and found a third were older than 60 and most retirees had heard about cryptocurrency from their adult children. 

She said half her clients had at least $60,000 invested in crypto and 10% had a portfolio of more than $300,000, and that figure was increasing. 

“Baby boomers and retirees are obviously looking at the types of gains [millennials] are getting and there’s a bit of FOMO [fear of missing out],” Ms Sierra said. 

As cryptocurrencies are largely unregulated, they provide fertile ground for fraud and scams.

ASIC warns, “Many crypto-asset providers are not licensed at this point in time. This means you may not be protected if the platform fails or is hacked. Be aware that a hacker can potentially steal the contents of your digital wallet. 

“Crypto systems allow users to stay relatively anonymous and there is no central data bank. So, if a hacker steals your crypto, you have little hope of getting it back.” 

If a crypto-asset fails, you will most likely lose all the money you put in. In most countries, crypto is not legal tender. You’re only protected to the extent that crypto fits within existing laws. 

In the last financial year, the Australian Financial Complaints Authority received more than 200 complaints about cryptocurrency, but said it expected that number to rise in coming years with an increase in uptake. 

Australians reported losing $170 million to crypto scams in 2023, according to the Australian Federal Police, which said the money lost was rarely recovered. 

There’s little recourse for people who fell victim to a dodgy operator. If something goes wrong, you don't have the same consumer protections. 

The ATO has this advice on investing in cryptocurrencies.