With about 20 years to retirement, Mr Luelf believed his $38,000 would never be enough to fund his golden years, even in a high-growth, high-performing fund. He was prepared to lose it all on a gamble for a different outcome.
“I thought why not go, at this late stage with a self-managed super fund, crazy, extreme, high risk – what have a got to lose?” he said.
Clayton Daniel, managing director of financial adviser collective XY Adviser, said young investors were more often looking to make crypto part of their super portfolios.
Mr Daniel said the people he was seeing investing in crypto were often in their 20s and 30s who were looking at a 30 to 40 year time horizon, and willing to take on a bit of risk with 10 per cent to 20 per cent of their portfolios.
“It might do remarkably well or it could also go to zero but they’re the type of people that are young enough to be willing to take on that risk,” he said.
New data from the Tax Office shows about 0.34 per cent of SMSFs hold $142 million in cryptocurrency, less than 0.1 per cent of total assets. The average holding is $75,000, while the median is about $28,700.
Australia’s largest cryptocurrency exchange, BTC Markets, said SMSF account onboarding rose five-fold in 2020, with the average trade size increasing 20 per cent over the final quarter of 2020.
Daniel said he’d never seen anyone go all in with their retirement savings.
Mr Luelf decided to use his super to buy crypto when he came across an online advertisement spruiking SMSFs – setup was quick, cost effective and the company promised to take care of all the administration.
Best of all, it meant he could build a 100 per cent crypto portfolio.
Starting out with a basket of 14 currencies, including a single Bitcoin, Mr Luelf said his strategy was based on a bit of research but nothing serious.
“What I invested in was what I thought was going to be the future,” he said, noting in particular a coin called XRP which is promoted as a currency exchange and remittance network allowing instant global capital transfers.
A little more than two years later, only one currency is down and it is down by 41 per cent. The rest have boomed between 33 per cent and 924 per cent, with the one Bitcoin, purchased in August 2018 for $8885, now worth $75,779.
And while Mr Luelf admits to considering more traditional investments, including equities, his crypto journey is far from over.
“I don’t want to miss out on what the next 20 years would provide in potential growth,” he said.
“Next year it might be worth $40,000 again, but, like shareholding, you can’t sort of stress about that, you look long term.”
Daniel said many cryptocurrency investors held similar views.
“There’s a story of someone purchasing two pizzas with 10,000 Bitcoins [back in 2010 – now worth about $750 million], and that story lives on to this day – no one wants to be the two pizza guy.”
The ATO has in recent years started to provide fact sheets on cryptocurrency which make clear SMSF trustees need to ensure their fund’s investment strategy is tailored and specific to relevant circumstances.
Investment strategies need to take into account things such as the personal circumstances of members such as age, employment status, and retirement needs, which influence risk appetite.