Governments, economists and financial experts alike have all expressed their scepticism about cryptocurrencies as an asset class, going so far as to call it a Ponzi scheme. Despite this, cryptocurrencies have seen massive adoption — with El Salvador making it a legal tender and many other countries looking to follow suit.

The price of several cryptocurrencies has also skyrocketed over the last few years. Take Bitcoin, for instance; when it was launched in 2009, 1 BTC was worth a fraction of a dollar. A little over a decade later, in 2021, Bitcoin hit an all-time high of $69,000. Therefore, it’s no surprise that people have started to view cryptocurrencies as a wealth-building vehicle, putting them up on a pedestal with the likes of gold.

“Crypto has been gaining traction as an asset in recent years, and this can be attributed to the growth potential that it has demonstrated. Even big investment firms are offering crypto-based products such as Bitcoin-backed loans, indicating an immense potential of the asset class beyond only retail investors,” Nischal Shetty, Co-founder and CEO at WazirX, told CNBC-TV18.

But can cryptocurrencies help you build a nest egg for your golden years? Are they a viable option for retirement planning? Several experts seem to think so, just as long as you keep it well-balanced with other assets. Many wealth management firms have also seen their clients add cryptos to their retirement portfolios.

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Adding cryptos to your retirement portfolio diversifies it and allows you to enjoy Bitcoin’s inflation-hedging properties.

Fidelity Investments, an American financial services company, was the first to offer cryptos in 401(k) retirement accounts. Since then, several other companies have also followed their lead. “Investing in crypto can be a small part of your retirement planning. Crypto is a volatile market and therefore should not be a huge part of your financial strategy, but it can be a way to diversify your holdings,” Danetha Doe, an economist and personal finance expert, told CNBC-TV18.

Things to consider while adding crypto to your retirement portfolio

Before adding cryptos to your retirement portfolio, some of the critical factors you should consider are your age, disposable income, and risk appetite. You also need to ensure that the cryptocurrencies you choose have long-term potential. Keeping this in mind, most crypto experts would invest in established coins such as Bitcoin and Ether.

“If an investor would like to make crypto a part of a well-balanced retirement portfolio, it should be about 10 percent of the total investment. However, the crypto that one holds for retirement should be bluechip with high long-term potential, such as Bitcoin,” Shetty added.

The coins you select will show how much risk you are taking. Since Bitcoin and Ether are the largest coins, most people prefer them over others.

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However, if you don’t have sufficient retirement savings built up already, you might want to steer clear of cryptos. Plus, you want to be aware of all security issues such as hacking and malware attacks. Experts recommend you keep your crypto in an offline or hardware wallet. These wallets are not connected to the internet and ensure that only you have access to its private keys, making them impervious to hacks.

How can you add crypto to your retirement portfolio?

CNBC-TV18 spoke to an expert from one of India’s top cryptocurrency exchanges, and their suggestion was to invest in crypto SIPs. You can plan your retirement with cryptos “only if you act smart and accumulate top coins. For me, every Bitcoin that I am accumulating through SIP every month is for my retirement,” they said.

Many crypto exchanges in India offer systematic investment plans (SIPs) in cryptos like Bitcoin and Ether. If you invest Rs 100 every week in a crypto SIP plan for five years, your estimated returns will add up to Rs. 2,29,824. That is a return on investment of over 2,000 percent; around 90 percent more than gold and bank FDs, as per ZebPay’s Bitcoin SIP calculator.

They had a similar outlook when it came to NFTs. “Most of the NFTs that I buy are the ones I will never sell at all. Making them a type of retirement saving room.”

“Being from a technical background helps me understand the risks associated with each crypto out there very well — if anyone else is looking for an alternative to a mostly opaque NPS in an ever-inflating rupee, Bitcoin might be just the thing you need,” they added.

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