10 Cryptos Suitable for your Superannuation Portfolio
Table of contents
- Key Crypto Characteristics for Superannuation
- 1. Bitcoin (BTC)
- 2. Ethereum (ETH)
- 3. Litecoin (LTC)
- 4. Chainlink (LINK)
- 5. Binance Coin (BNB)
- 6. Maker (MKR)
- 7. Compound (COMP)
- 8. Basic Attention Token (BAT)
- 9. Polkadot (DOT)
- 10. Synthetix (SNX)
- Bonus Consideration: Binance Leveraged Tokens
Today we are discussing the Top 10 Cryptocurrencies worth considering for an Australian Superannuation Portfolio.
A quick heads up that this is not financial advice, please do your own research and speak to an expert if you need help.
Many superannuation experts suggest the importance of diversification in your Superannuation portfolio, stating that “diversification lowers risk”.
Across asset classes, it reduces a portfolio’s exposure to the risks of any one class. It cannot eliminate the risk of loss, but it can help to protect against unnecessarily large losses resulting from the underperformance of one portion of the portfolio. Undiversified portfolios also have greater potential to suffer catastrophic losses.Vanguard Super – Over $146 Billion in Assets under management
Bitcoin and other cryptocurrencies can potentially contribute to such diversification from 2021. That seems to be confirmed by Fidelity, a company that offers Institutional solutions for digital assists confirm in their Bitcoin Investment Thesis that Bitcoins Volatility Is Worth It and Recommends Investing up to 5% of Ones Portfolio. That being said, let’s take a look at the characteristics of crypto required to be considered for your Super, and the top 10 candidates.
Key Crypto Characteristics for Superannuation
- Price Stability – Is the dollar price stable enough to reduce big portfolio value fluctuations?
- Longevity – How long has the crypto been around and does it have a future?
- Robustness – Has the crypto proven ability to withstand or overcome adverse conditions in the market?
- Moat – Which advantages and protections does the crypto have against the competition?
1. Bitcoin (BTC)
Bitcoin is a peer-to-peer online currency, meaning that all transactions happen directly between equal, independent network participants, without the need for any intermediary to permit or facilitate them.
Why Bitcoin is suitable for Superannuation
- Bitcoin is the oldest crypto (13 years) and has the biggest marketcap, as this grows, the price volatility is expected to reduce over time.
- Bitcoin’s fundamentals are relatively shielded from the economic impact of the COVID-19 pandemic, and as Gold did, it also thrived during this period, enhancing its prospects of a being a hedge.
- Bitcoin is also unique in that it continues to be influenced by retail investor sentiment and can capitalize on the shift in the way retail investors interact with traditional markets.
- The popularity of Bitcoin with millennials and the expected transfer of wealth to the millennial generation over the next 10 years, which some could flow into Bitcoin and crypto.
- Bitcoin has a fixed supply of 21 million Bitcoins.
- Many attempts to clone and overtake BTC have failed (hard forks such as BCH, BSV etc) enhancing its robustness value.
2. Ethereum (ETH)
Ethereum is a decentralized open-source blockchain system that features its own cryptocurrency, Ether. ETH works as a platform for numerous other cryptocurrencies, as well as for the execution of decentralized smart contracts.
Why Ethereum is suitable for Superannuation
- Since 2020 we have seen ETH grow 744% in price outperforming Bitcoin which increased 371% and the S&P 500 at only 8.35%.
- In 2020 we also saw the emergence of DeFi (powered by Ethereum) and it’s marketcap surpassing US $10 Billion which looks like a very interesting market with lots of exciting developments for 2021.
- Enterprise Ethereum Alliance, a group of people who help build and promote Ethreum are expanding lower-risk decentralised architecture approach to reduce the risk of centralisation.
3. Litecoin (LTC)
Litecoin is a cryptocurrency that was designed to provide fast, secure and low-cost payments by leveraging the unique properties of blockchain technology.
Why Litecoin is suitable for Superannuation
- Its close relationship to Bitcoin and its digital scarcity make Litecoin especially valuable. On-chain activity shows a healthy Litecoin network that has over 100,000 active addresses, and is processing roughly 40,000 transactions every 24 hours.
- Where BTC lacks some value in making transactions, due to the fluctuating transaction fees, LTC is particularly useful with almost zero transaction fees.
- Litecoin’s code is very similar to Bitcoin’s and includes both a fixed supply and an LTC block reward halving like Bitcoin
4. Chainlink (LINK)
Chainlink is a decentralized oracle network which aims to connect smart contracts with data from the real world. Chainlink has the potential to connect smart contracts with the outside world.
Why Chainlink is suitable for Superannuation
- Chainlink provides the connection between real world data and the virtual blockchain data. This unique use case makes it extremely powerful to blockchain, enhancing its longevity prospects.
- Decentralized blockchains are using Chainlink services to power DeFi projects using Chainlink’s decentralized oracle network, enhancing the projects usefulness ten fold.
- Chainlink continues to partner with hundreds of companies growing their ecosystem.
5. Binance Coin (BNB)
Binance Coin is the cryptocurrency of the Binance platform. It is a trading platform exclusively for cryptocurrencies. The platform achieved an enormous success within a very short time and is focused on worldwide market.
Why Binance Coin is suitable for Superannuation
- Binance has expanded worldwide including into Australia in 2020.
- Over recent years, Binance has acquired many high profile businesses such as Coinmarketcap and Blockfolio.
- BNB has utility in trading (reducing the trading fees) which is an expanding market as more people and institutions start trading cryptos the use of BNB for staking and trading will increase.
- The strong brand, enhanced trading software and great management team of Binance is helping it grow exponentially.
6. Maker (MKR)
Maker is the governance token of the MakerDAO and Maker Protocol — respectively a decentralized organization and a software platform, both based on the Ethereum blockchain — that allows users to issue and manage the DAI stablecoin.
Why Maker is suitable for Superannuation
- The future of Maker looks good. The team has delivered on its promise of forming a strong, decentralized stablecoin ecosystem.
- Being a decentralized organization helps its prospects of longevity should cryptos be banned by countries or governments.
- A stablecoin is a token (like Bitcoin and Ethereum) that exists on a blockchain, but unlike Bitcoin or Ethereum, Dai has no volatility. It’s instead created/destroyed in response to DAI price fluctuations in order to keep it hovering around $1 USD. This function could prove extremely useful for the future of stablecoins.
7. Compound (COMP)
Compound is a DeFi lending protocol that allows users to earn interest on their cryptocurrencies by depositing them into one of several pools supported by the platform.
Why Compound is suitable for Superannuation
- Compound introduces a truly open lending environment to the blockchain sector. There are no credit checks and the funds issue immediately, just needing to provide collateral. With the growing interest in DeFi, puts COMP in a promising position.
- Compound is managed by a decentralized community of COMP token-holders and their delegates, who propose and vote on upgrades to the protocol, enhancing its longevity prospects.
8. Basic Attention Token (BAT)
Basic Attention Token is the token that powers a new blockchain-based digital advertising platform designed to fairly reward users for their attention, while providing advertisers with a better return on their ad spend.
Why Basic Attention Token is suitable for Superannuation
- The digital marketing industry represents one of the most important and valuable sectors in the world. The BAT token is a leader in this sector and offers a free market where anonymous participants can share value. Advertisers can better target their users and the users will be paid for watching what they are interested in. Similarly, publishers will receive BAT rewards based on the user attention they received.
9. Polkadot (DOT)
Polkadot is an open-source sharding multichain protocol that facilitates the cross-chain transfer of any data or asset types, not just tokens, thereby making a wide range of blockchains interoperable with each other.
Why Polkadot is suitable for Superannuation
- Scalability has always been an issue (just look at the limits of VISA). Polkadot is attempting to solve this problem by providing limitless Scalability between public and private blockchains. Enhancing its longevity as an essential supporting technology.
- Polkadot can support upgrades, without having to resort to drastic hard forks to implement change, enhancing its robustness value.
- Many decentralised projects utilize Polkadot for its hybrid consensus models, staking mechanisms, and state-transition function. Utility to DeFi projects enhances its utility.
10. Synthetix (SNX)
Synthetix is based in Australia, and provides a liquidity protocol for derivatives trading in DeFi, allowing anyone, anywhere to gain on-chain exposure to a vast range of assets.
Why Synthetix is suitable for Superannuation
- We’ve included Synthetix as a candidate, as it offers some Australian exposure into the crypto portfolio.
- It also has promise in the decentralised trading, staking and loans space, offering a very complex protocol built on Ethereum, moving towards a censorship-resistant, decentralised governance solution.
Bonus Consideration: Binance Leveraged Tokens
Self managed super funds are not permitted to have debt. This means that leverage and margin trading are not allowed. You are, however, permitted to own assets or products where there is leverage within the product but no debt to you, the purchaser.
Binance Leveraged tokens are an example of this because the purchaser is not taking on debt but the price of the leveraged token moves up and down a multiple of the underlying asset. These tokens are available for many of the top cryptos and are similar to leveraged ETFs on the stock market. The SPXL for example is an ETF designed to move 3 times as much as the S&P 500. So if the S&P 500 moves up 2% the SPXL can be expected to move up about 6%.
It is important to understand that although products like these can magnify your profits they also magnify your losses if the market moves against you.
With over 8,000 coins and tokens on the market now, it is essential to know which ones are actually useful and have a future, and those that clearly have no long term future.