Many virtual currencies, such as Bitcoin, have emerged over the last 10 years, but just how safe are they as an investment? We explore the basics of cryptocurrencies and their potential implications for super.

What are cryptocurrencies?

Cryptocurrencies are digital money that use encryption to secure and validate transactions. You’ve likely heard about the most popular type – Bitcoin.

Since Bitcoin, there’s been an explosion of cryptocurrencies and there are now more than 1000 available on the market. Most actually started in social media or online gaming communities. Users can send and receive ‘coins’ using a public ledger called ‘Blockchain’, which records all transactions.

While some retirement funds in the United States have taken the bold step of investing directly in major cryptocurrencies, so far, no Australian super funds have followed suit. Is CareSuper considering it? The short answer is no – and here’s why:

Cryptocurrency values are uncertain

While they are actively traded, virtual currencies are extremely volatile, meaning their value can plunge – or skyrocket – based on things like popularity or ease of trading.

Unlike traditional investments where we understand what the risk and return drivers are, with cryptocurrencies these are currently not well known, and their value seems to be based on what others are willing to pay for them. So, despite their growing popularity, there are still question marks over their long-term sustainability.

The lack of information and substance to virtual currencies is one of the reasons CareSuper does not invest directly in them. But we will continue to monitor virtual currencies and their ‘Blockchain’ technology for any future investment opportunities and keep you posted.

We’re focused on getting you future-ready

Remember super is about saving for the future, so the goal is steady and consistent growth to ensure you’ve got a reliable income later on. Investing in cryptocurrencies like Bitcoin is a very risky way to go about this. And at the end of the day, we won’t take such big risks with your hard-earned money.

If you missed it last month, check out this short video to learn more about our investment philosophy and the strategies we use to grow and protect your money.