The Average 401k Balance by Age

The Average 401(k) Balance by Age

A 401(k) can be a valuable part of a retirement savings plan. But how much should you have saved in your 401(k) at different ages or career stages?

Charting the average 401(k) balance by age can help put your own savings in perspective. Seeing what others are saving in their 20s, 30s, 40s, and beyond can be a useful way to gauge whether you’re on track with your own retirement plans and what else you can do to maximize this critical, tax-deferred form of savings.

Keep reading to learn about these possible benchmarks and smart ways to handle common savings challenges people may face at different phases of life. After all, the point isn’t to see whether you measure up but to ensure you keep progressing toward your retirement goals.

Average 401(k) Balance by Age Group

Pinning down the average 401(k) account balance can be challenging, as only a handful of sources collect information on retirement accounts, and they each have their own methods for doing so.

Vanguard is one of the largest 401(k) providers in the U.S., with nearly 5 million participants. For this review of the average 401(k) balance by age, we’ll use data from Vanguard’s “How America Saves 2022” report . Specifically, we’ll look at the average and median 401(k) balances by age for savers in 2021.

Why look at the average balance amounts, as well as the median? Because there are people who save very little as well as those who have built up very substantial balances, the average account balance only tells part of the story. Comparing the average with the median amount — the number in the middle of the savings curve — provides a bit of a reality check as to how other retirement savers in your cohort may be doing.

Age Group

Average 401(k) Balance

Median 401(k) Balance

Under 25$6,264$1,786
25-34$37,211$14,068
35-44$97,020$36,117
45-54$179,200$61,530
55-64$256,244$89,716
65+$279,997$87,725
Source: Vanguard

Ages 35 and Younger

The average 401(k) balance for savers 35 and younger can be split into two groups:

•   Under age 25: $6,264

•   Ages 25 to 34: $37,211

Median 401(k) balances for both age groups are lower. The median balance is a dividing point, with half of savers having more than that amount saved for retirement in their 401(k) and the other half having less.

It makes sense that the under 25 group would have the lowest balances in their 401(k) overall, as they’ve had the least time to save for retirement. They’re also more likely to earn lower starting salaries versus workers who may have been on the job for 5 to 10 years. The youngest workers may not have as much income to put towards a 401(k).

Key Challenge for Savers

Debt often presents a big challenge for younger savers, many of whom may still be paying down student loan debt or who may have credit card debt (in some cases, both). How do you save for retirement when you want to pay off debt ASAP?

It’s a familiar dilemma, but not an insurmountable one. While being debt-free is a priority, it’s also crucial at this age to establish the habit of saving — even if you’re not saving a lot. The point is to save steadily (e.g., on a biweekly or monthly schedule) and, whenever possible, to automate your savings.

Then, when your debt is paid off, you can shift some or all of those payments to your savings by upping your retirement contribution.

Ages 35 to 44

•   Average 401(k) balance: $97,020

•   Median 401(k) balance: $36,117

The average 401(k) balance for workers in the 35 to 44-year-old group is $97,020. The median 401(k) balance for these workers is $36,117. That’s quite a gap! So what is a good average balance to have in your 401(k) by this point?

One rule of thumb suggests having three times your annual salary saved for retirement by the time you reach your 40s. So, if you’re making $100,000 annually, ideally, you should have $300,000 invested in your 401(k). This assumes that you’re earning a higher income at this point in life, and you can contribute more to your plan because you’ve paid off student loans or other debts.

Key Challenge for Savers

While it’s true that being in your late 30s and early 40s can be a time when salaries range higher — it’s also typically a phase of life when there are many demands on your money. You might be buying a home, raising a family, investing in a business — and it can feel more important to focus on the ‘now’ rather than the future.

The good news is that most 401(k) plans offer automatic contributions and the opportunity to increase those contributions each year automatically. Even a 1% increase in savings each year can add up over time. Take advantage of this feature if your plan offers it.

Ages 45 to 54

•   Average 401(k) balance: $179,200

•   Median 401(k) balance: $61,530

Among 45 to 54-year-olds, the average 401(k) balance is $179,200, while the median balance is $61,530.

The rule of thumb for this age suggests that you stash away six times your salary by age 50. So again, if you make $100,000 a year, you should have $600,000 in your 401(k) by your 50th birthday. Whether this is doable can depend on your income, 401(k) deferral rate, and overall financial situation.

Key Challenge for Savers

For some savers, these are peak earning years. But children’s college costs and the need to help aging or ailing parents are among the challenges savers can face at this stage. The great news is that starting at age 50, the IRS allows you to start making catch-up contributions. For 2022, the regular 401(k) contribution limit is $20,500 – but add in $6,500 in catch-up contributions, and you can save $27,000 annually in a 401(k).

While you may feel strapped, this could be the perfect moment to renew your commitment to retirement savings because you can save so much more.

Ages 55 to 64

•   Average 401(k) balance: $256,244

•   Median 401(k) balance: $89,716

The average 401(k) balance among 55 to 64-year-olds is $256,244. The median balance is much lower, at $89,716.

By this stage, experts typically suggest having eight times your annual salary saved. So going back to the $100,000 annual salary example from earlier, you’d need to have $800,000 tucked away for retirement by age 60.

Key Challenge for Savers

As retirement draws closer, it can be tempting to consider dipping into Social Security. At age 62, you can begin claiming Social Security retirement benefits to supplement money in your 401(k). But starting at 62 gives you a lower monthly payout — for the rest of your life. Waiting until the full retirement age, which is 66 or 67 for most people, will allow you to collect a higher benefit. And if you can wait until age 70 to take Social Security, that can increase your benefit amount by 32% versus taking it at 66.

Ages 65 and Older

•   Average 401(k) balance: $279,997

•   Median 401(k) balance: $87,725

The average 401(k) balance for those 65 and older is $279,997. The median balance is $87,725. So, is nearly $280,000 enough to retire, assuming you’re fully vested in your 401(k)?

Most experts would say no, unless you have other resources set aside for retirement. A pension plan, for example, or an Individual Retirement Account (IRA) could supplement your 401(k) savings. Investing in an annuity is also an option worth considering if you’re interested in creating a guaranteed income stream for retirement.

Key Challenge for Savers

Just because you turn 65, a common shorthand for “retiree,” doesn’t mean you’re at the end of the line or out of options. After all, 70 is the new 60 for many people these days, and you may be embarking on a new chapter in life, love, or business that could change your financial circumstances. The challenge here is to revisit your retirement plan and possibly speak with a financial professional, if you haven’t done so, to maximize all potential income streams and ways to save.

And don’t forget: A 2019 law eliminated the long-standing age limit of 70 ½ for making retirement contributions to your IRA (and Roth IRAs don’t have age limits). If life permits, you can (and should) keep saving.

401(k) Savings Potential by Age

Suppose an investor maxes out their 401(k) contribution of $20,500 annually beginning at age 25. Also, assume that the 401(k) has an average rate of return of 9.5%. By the age of 65, the investor will have contributed a total of $840,500 of their own money into their 401(k), but because of compounding returns, it could result in a 401(k) savings potential of nearly $9 million.

However, these figures are just hypotheticals to show the power of compounding returns in a 401(k) account. This does not account for fees, changes in contribution limits, a possible 401(k) employer match, or fluctuations in the market. Nonetheless, by contributing to a 401(k) early and often, investors may be able to build up a substantial retirement nest egg.

Hypothetical 401(k) Balance by Age, Assuming 9.5% Annual Rate of Return

Age

Total Contributions

Potential 401(k) Balance

25$20,500$20,500
30$123,000$156,187
35$225,500$369,790
40$328,000$706,052
45$430,500$1,235,409
50$533,000$2,068,743
55$635,000$3,380,610
60$738,000$5,445,802
65$840,500$8,696,908

Tips on Improving Your 401(k) Return

Getting the best rate of return on your 401(k) can help you to fund your retirement goals. But different things can affect your returns, including:

•   Investment choices

•   Market performance

•   Fees

Time is also a consideration, as the longer you have to invest, the more room your money has to grow through the power of compounding interest. If you’re interested in maximizing 401(k) returns, here are some things to keep in mind.

1. Review Your Contribution Rate

The more you contribute to your 401(k), the more growth you can see. If you haven’t checked your contribution rate recently, it may be a good idea to calculate how much you’re saving and whether you could increase it. At the very least, it’s a good idea to contribute enough to qualify for the full employer matching contribution if your company offers one.

As noted above, if your plan offers automatic yearly increases, take advantage of that feature. Behavioral finance studies have repeatedly shown that the more you automate your savings, the more you save.

2. Make Catch-Up Contributions If You’re Eligible

As mentioned, once you turn age 50, you have an opportunity to contribute even more money to your 401(k). If you can max out the regular contributions each year, making additional catch-up contributions to your 401(k) can help you grow your account balance faster.

3. Take Appropriate Risk

The younger you are, the more time you have to recover from market downturns and, thus, the more risk you can generally take with your investments. This is important to note as some risk is necessary to grow your portfolio. On the other hand, being too conservative with your 401(k) investments could cause your account to underperform and fall short of your goals.

4. Pay Attention to Fees

Fees can erode your investment returns over time and ultimately reduce the size of your nest egg. As you choose investments for your 401(k), consider the risk/reward profile and the cost of different funds. Specifically, look at the expense ratio for any mutual funds or exchange-traded funds (ETFs) offered by the plan. This reflects the cost of owning the fund annually, expressed as a percentage. The higher this percentage, the more you’ll pay to own the fund.

Creating or Reassessing Your Retirement Goals

If you’re still working on putting your retirement savings plan together, a 401(k) can be a good place to start. As you decide how much to save, ask yourself these questions:

•   What kind of lifestyle do I want to live in retirement?

•   When do I plan to retire?

•   How much of my income can I afford to save in a 401(k)?

•   Is there an employer match available, and if so, how much?

•   How much risk am I willing to take with 401(k) investments?

A retirement calculator can help you estimate how much you might need to save for retirement. Some calculators can factor in how much you’ve already saved to tell you if you’re on track with your goals.

Recommended: When Can I Retire? This Formula Will Help You Know

It can be helpful to check in with your goals periodically to see how you’re doing. For example, you might plan an annual 401(k) checkup at year’s end to review how your investments have performed, what you contributed to the plan, and how much you’ve paid in fees. This can help you make smarter investment decisions for the upcoming year.

Improving Your Retirement Readiness

The best way to improve your retirement readiness is to start saving early and often. A good rule of thumb is to save and invest at least 10-15% of your income for retirement. The more you can save now, the greater chance it has to grow because of compounding returns.

But you want to save and invest your money wisely. Consider using a mix of investment vehicles, such as stocks, bonds, ETFs, and mutual funds, to help diversify your portfolio and minimize risk.

Additionally, you can make your money work harder for you by contributing to an IRA and a 401(k). These accounts offer tax advantages that can help you save more money for retirement.

Finally, be sure to monitor your retirement account balances and make adjustments as needed to ensure you are on track to reach your retirement goals.

The Takeaway

What is the average 401(k) balance by age? It’s a tricky question to answer as there’s no single source of information for these numbers. And it’s important to remember that the average 401(k) balance by age is just an average; it doesn’t necessarily reflect your ability to save for retirement.

That said, the average and median 401(k) balances noted above reflect some important realities for different age groups. It’s clear that some people can save more, others less — and it’s crucial to understand that many factors play into those account balances. It’s not simply a matter of how much money you have, but the choices you make. Every stage of life brings unique challenges that can derail your retirement, but with a bit of forethought and planning, it’s possible to keep your retirement on track.

Also, keep in mind that a 401(k) isn’t the only way to save and invest money for the future. You could also save for retirement with a Traditional or Roth IRA. By opening an online retirement account with SoFi Invest®, you can get access to a broad range of investment options, member services, and our robust suite of planning and investment tools.

Easily manage your retirement savings with a SoFi IRA.

FAQ

How much do you need to retire?

Determining how much money you need to retire depends on your lifestyle, goals for retirement, and your specific cost of living.

How much should someone in their 60s have in their 401(k)?

The amount someone in their 60s should have in their 401(k) will vary depending on factors such as income, investment goals, and retirement plans. However, as a general guideline, it is recommended that individuals in their 60s aim to have at least eight to 10 times their salary saved in their 401(k) to ensure a comfortable retirement.

How much should I have in my 401(k) by age 30?

Ideally, you should aim to have saved at least the equivalent of your annual salary in your 401(k) by age 30. So, if you make $50,000 annually, you should try to have $50,000 in savings by age 30. This will help ensure that you are on track to retire comfortably.


Photo credit: iStock/kate_sept2004

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A., or SoFi Lending Corp.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Inflation, Cryptocurrency, and How They Interact

Inflation, Cryptocurrency, and How They Interact

When it comes to crypto and inflation, certain cryptocurrencies have been touted as assets that can protect against inflation. But lately, with rising interest rates and declining crypto prices, crypto isn’t proving to be the inflation-fighter many had hoped.

For example, gold has been a popular hedge against inflation, as it holds value well and doesn’t tend to be volatile. For several years, many people put Bitcoin in a similar category — as a fairly stable store of value.

But crypto values aren’t holding steady in the face of growing inflation — not even Bitcoin. It remains to be seen whether different types of crypto can indeed be an inflation hedge or not.

Understanding Inflation and Cryptocurrency

Inflation

Inflation occurs when a fiat currency such as the U.S. dollar decreases in value over time, which in turn causes the price of goods and services to rise.

Inflation can occur when there is an extra supply of currency, when money is printed faster than it’s needed in the market. It also happens as the price of goods increases, which can be because of various factors — meaning it takes more and more units of a currency to purchase the same products.

The Federal Reserve Bank aims to keep inflation at 2%, and uses monetary policies to keep it at that rate and not go higher.

The question is: Is crypto a good hedge against inflation, given current conditions?

Cryptocurrency

Understanding how cryptocurrency works will help to shed some light on why these digital currencies have been considered an inflation hedge, even though crypto is a relatively new asset class.

Cryptocurrencies are digital and decentralized, meaning they are maintained by peer-to-peer (P2P) networks, and created using distributed ledger technology (blockchain) and through P2P review. This is accomplished through different consensus methods, which vary depending on the coin.

So, during inflationary times for the U.S. dollar — when purchasing power is declining and the cost of goods is rising — the role of the Federal Reserve, the central bank that governs the dollar, is key. But cryptocurrencies aren’t beholden to a governing body like that, and thus cannot be controlled or manipulated in the same way that fiat currencies can. This is why many believed or hoped that cryptocurrencies, particularly Bitcoin, would be impervious to inflationary conditions.

Do Cryptocurrencies Experience Inflation?

The terms “inflationary” and “deflationary” refer to whether the supply of a cryptocurrency is growing (inflationary) or shrinking (deflationary). These terms are somewhat separate from the traditional concept of inflation, which focuses on the cost of goods and services.

Bitcoin is largely considered an inflationary crypto because its supply is still increasing, similar to Dogecoin. That said, some consider Bitcoin to be deflationary, because the supply can only increase to a hard cap of 21 million coins, and the rate that they get released to the market through mining decreases over time (a process called “halving”, because the number of Bitcoin mined per block is cut in half every four years). For now the supply of Bitcoin is still increasing, until it has all been mined around the year 2140.

Once all 21 million Bitcoins have been mined, Bitcoin will not be inflationary or deflationary. It will be disinflationary, meaning it has a stable supply and constant monetary base.

Other coins are not as clear cut. Ethereum is considered an inflationary currency, because its supply is increasing — even with the so-called Ethereum Merge — but under a certain protocol, some ETH are burned.

Cryptocurrencies can have very volatile values over short periods of time, making them a risky asset class. Even if they do maintain value when a national currency decreases in value, consumer purchasing power is still affected if the price of goods and services increases — and consumers can’t necessarily rely on crypto as a steady store of value to combat that.

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Crypto vs Fiat Currencies in Periods of High Inflation

During periods of high inflation, fiat currency decreases in value and consumers’ purchasing power goes down. Cryptocurrencies that have a fixed supply could theoretically protect against inflation, and this has been one of the benefits of using crypto for some investors, but the reality is a bit more complicated.

Crypto During Inflation

Although crypto has been talked about as a hedge against inflation, in reality that hasn’t exactly held up, as evidenced by events in 2021 and 2022.

Inflation has been fairly low over the past several years, so the crypto hedge theory hasn’t really been tested thoroughly, but 2022 has seen a sharp increase in inflation along with a crash in both the stock market and cryptocurrencies, suggesting that crypto may not be as safe a hedge as was previously thought.

Also, since so much institutional money has gone into crypto in recent years, some think that helps to explain why crypto tends to follow the broader market and is getting more closely correlated with the S&P 500 and the Nasdaq. It’s difficult to say, as there is no historical precedent that provides a clear comparison for the current situation.

For an asset to be a good hedge against inflation, it needs to be stable and trustworthy. Having a fixed supply is in Bitcoin’s favor, but Bitcoin’s short-term volatility makes it a somewhat unreliable hedge against inflation, although it may be inflation resistant. It might go up in value when the U.S. dollar goes down, but if it then sees a dramatic downswing it may not keep up with the pace of inflation.

For this reason, many investors have returned to gold since the recent drops in the crypto market. On the other hand, the long-term prospects of Bitcoin and other cryptocurrencies have much more potential for growth than another ‘safe’ asset such as gold.

An alternative to cryptocurrencies like Bitcoin is stablecoins. Stablecoins are pegged to an external asset’s value, such as a national currency, making them more stable than other cryptocurrencies. There are stablecoins backed by many different fiat currencies, making it pretty easy to trade between those pegged to the U.S. dollar and other currencies as inflation rates change.

However, holding a stablecoin backed by the U.S. Dollar won’t protect against inflation.

Fiat Currencies During Inflation

Fiat currencies are the opposite of cryptocurrencies in that central banks can create more of them at any time. When more money gets printed, this creates inflation risk. The value of the fiat currency decreases, so the same amount of money will no longer buy the same amount of goods.

Fiat Currencies

Cryptocurrencies

Regulated by central authoritiesDecentralized
Supply can be increased by central banks; fiat is considered inflationaryCrypto can be inflationary or deflationary because supply can be increased or decreased
Lose value when inflation risesMay lose or gain value when inflation rises

Tips on Hedging Against Inflation

There are several ways one can possibly protect their money from inflation. These include:

•   Gold and precious metals

•   Commodities

•   Bonds

•   Real Estate Investment Trusts (REITs)

•   The S&P 500

•   Real Estate

•   International diversification

•   Treasury Inflation Protected Securities (TIPS)

💡 Here are more tips and details on hedging against inflation

The Takeaway

During periods of inflation — when purchasing power is declining and the cost of goods is rising — the Federal Reserve can intervene by adjusting monetary policy. Because cryptocurrencies aren’t beholden to a governing body like that, they cannot be manipulated in the same way that fiat currencies can. This is why many believed or hoped that holding cryptocurrencies, particularly Bitcoin, would act as an effective hedge against rising prices.

Crypto is still a relatively new asset class, so in the future it may prove to be a solid hedge against inflation, but it is still a developing and immature sector. Overall, it’s too early to say whether crypto is an effective hedge, but investors are looking to alternatives to the traditional choices of gold and bonds since those are no longer proving reliable.

That said, some believe that Bitcoin is tied more to monetary policy and asset inflation/deflation, not to core inflation. There are some signs indicating that that is the case and it may hold to be true in the future. Between 2020-2022 there have been so many dramatic world events as well, so it’s difficult to pinpoint exactly what crypto is tied to.

Regardless of the current market climate, there may be other reasons to invest in crypto — particularly its long-term prospects. If you’re interested in trading cryptocurrencies, you can set up an Active Invest account with SoFi Invest® and open a crypto trading account from there. SoFi’s secure and convenient app lets you research, track, buy and sell crypto, stocks, ETFs, and other assets right from your phone or laptop, 24/7. And you can get started with just a few dollars.

Trade crypto and get up to $100 in bitcoin! (Offer is available through 12/31/22; terms apply.)

FAQ

Is the crypto market causing inflation?

No. The decline in value of many cryptocurrencies in 2022 coincided with a period of inflation in the broader U.S. economy, but that was not caused by the crypto markets.

Does crypto help with inflation? Does it hurt?

Crypto isn’t inherently good or bad for inflation. It is a way to diversify funds away from cash or stocks, which may help protect against inflation — although crypto does not have a long enough track record to know for sure.

Can cryptocurrencies suffer from inflation?

Not exactly. Cryptocurrencies don’t behave like traditional fiat currencies. They aren’t regulated and they don’t offer a consistent store of value, thus they generally aren’t used to make basic consumer purchases. So a drop in crypto values may impact investors’ portfolios, but not the cost of living.

Can you use cryptocurrencies to hedge against inflation?

Cryptocurrencies may be a way to protect against inflation, but they are very volatile and are becoming increasingly correlated with the broader market, so there is no guarantee they will hold value as other currencies decrease.


Photo credit: iStock/akinbostanci

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A., or SoFi Lending Corp.
2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2022. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

First Trade AmountBonus Payout
LowHigh
$50$99.99$10
$100$499.99$15
$500$4,999.99$50
$5,000+$100

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Crypto vs Stocks: 8 Key Differences Traders Should Know

Crypto vs Stocks: 8 Key Differences Traders Should Know

Whether to invest in crypto vs. stocks may sound like a crazy debate to longtime traders and investors. The two asset classes couldn’t be more different — in terms of how they’re structured (one is digital, one has real-world value), how volatile they are (crypto’s swings can be more dramatic), where you store these assets, and more.

So, is crypto better than stocks — or are stocks better than crypto? Each one offers its own compelling set of opportunities, as well as risks. For new traders considering investing in crypto, here are some things to review as you enter the crypto vs. stocks debate.

Stocks: A Quick Review

When thinking about the difference between crypto and stocks, the first point to remember is that a share of stock represents a percentage of ownership in a tangible, brick-and-mortar business.

While stocks and whole sectors go in and out of fashion with investors, the stock itself still corresponds to a portion of a functioning company, with a price that reflects the value of that company. By contrast, cryptocurrencies are wholly digital, and that impacts their value, their real-world viability, and how they are traded.

💡 Recommended: What Is a Stock? A Closer Look

Cryptocurrency: A Quick Review

Cryptocurrencies are types of digital assets that are created and stored digitally, using blockchain technology.

The main difference between crypto vs. stocks is that stocks are a share of ownership, while cryptocurrencies don’t have any intrinsic value, unlike fiat currencies. Fiat currency, like the U.S. dollar, is money that’s issued and backed by a central bank or government. Cryptocurrencies are wholly digital, and are not issued or overseen by a government, bank, or any other central authority.

And because they’re super volatile, most types of crypto aren’t currencies in the traditional sense. Their real-world value as a means of purchasing goods and services is limited right now.

The value of a cryptocurrency reflects a variety of factors, including current supply and demand for that currency. In some cases, it also reflects a faith in the underlying technology that powers the currency, or a particular innovation that a certain crypto stands for.

💡 Recommended: What Is Cryptocurrency? A Beginner’s Guide

8 Major Differences Between Crypto and Stocks

Cryptocurrencies and stocks are very different assets. Here’s a look at some of the characteristics that set them apart.

1. Ownership

To purchase and own stock, you typically need a brokerage account to handle the transaction. That account is verified by information like your address, Social Security number, signature and more. This offers some protection in the event of identity theft or fraud.

Cryptocurrency offers more anonymity, but less security. You keep your coins or other digital assets in a crypto wallet, which can be fully virtual or it can exist on a USB drive. That anonymity may create unique risks, such as losing crypto to hackers or forgetting your password and losing access to your account. Or you could misplace your USB drive, and lose all your crypto.

💡 Recommended: How to Find Lost Bitcoins and Other Cryptos

2. Exchanges

Stock exchanges have existed in some form or another for more than three centuries, most famously on Wall Street, in New York City. Cryptocurrency exchanges, on the other hand, are fairly new. The largest one, Binance, launched in 2017. Coinbase, another major player, was created in 2012.

Binance had a daily trading volume of about $76 billion, as of August 2022. At the same time, the Nasdaq, which is just one small part of the global stock market, had a trading volume that was nearly three times that amount. And the Nasdaq is only 14.5 % of the total stock market by some estimates.

3. Liquidity

Smaller markets also affect the ability to trade in and out of your investments, whether they’re stocks or cryptocurrencies. That ability to trade at will is called liquidity. Investors typically consider stocks highly liquid, since there are so many active traders in the stock market.

With cryptocurrency, on the other hand, liquidity varies quite a bit from one form of crypto to another. Bitcoin is more liquid than most cryptocurrency, simply because it has a higher trading volume. That means there are more buyers and sellers who want to trade if you want to get in or out of that particular cryptocurrency.

Both stock investors and crypto investors can fall victim to slippage, which involves losses when you have to sell a large amount of an asset during a period of low liquidity. However, the risk is higher for crypto owners, given the lower levels of liquidity in the crypto markets.

4. Volatility

There is volatility and risk involved in buying both crypto and stocks. Both assets can go up or down in value, and it’s nearly impossible to time the market to know exactly the best time to buy or sell.

While the stock market has a well-earned reputation for volatility, the broader market has tended to go up over the course of decades, with an average total return of about 10%. Since past performance is no guarantee of future returns, and public stocks must publicly report on their finances, investors have access to several sources of information to make decisions about purchasing those securities.

On the other hand, cryptocurrency is more likely to undergo sudden, drastic changes in value, sometimes without warning, leaving some to particularly wonder why crypto can be so volatile. Those swings can lead to potentially huge wins for crypto traders, but it can also create large losses in a very short period of time. More than 1,600 forms of crypto have vanished altogether in recent years. While it is possible for public companies to go bankrupt, they’re far less likely to lose all of their value than most cryptocurrencies are.

Safe and secure crypto trading.

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5. Trading Costs

Every time an investor buys or sells stocks, they may have to pay transaction fees, such as commissions, that eat into their returns. Even investors who purchase low-fee, no-load index mutual funds — which are essentially baskets of stocks — have to pay fees that cover the costs of running the fund.

The costs of actively managed funds, and for trading through a brokerage account, may be higher.

The difference between stocks and crypto here isn’t substantial, because crypto trading can also come with substantial costs. Crypto exchanges charge fees. And there are “gas fees,” which are the costs extracted by a network for various transactions on the blockchain. Those fees vary widely from one form of crypto to another.

Some networks will raise the gas fees to speed up transactions. But by some estimates, the leading marketplaces charge at least 1.5% in fees to buy or to sell crypto. That will wipe out any gain under 3%.

6. Regulation

There are national agencies such as the Securities and Exchanges Commission (SEC) in the United States, which oversee stocks and stock markets. The regulation by those companies ensures a certain level of transparency into the publicly traded companies.

By contrast, cryptocurrencies remain largely unregulated.

That’s a benefit to some investors, who may have mixed feelings about government regulation. Decentralized networks run each cryptocurrency, with individuals focused on maintaining their technology and ensuring the integrity of the project.

Because the issue of crypto regulation is in flux, cryptocurrencies and exchanges remain at risk of facing drastic transformation or elimination. For example, a key debate in 2022 has been the question of whether crypto is a security or a commodity.

7. Trading Hours

The stock markets are usually only open during business hours in their home country, Monday through Friday, and closed on holidays on weekends.

By contrast, the crypto market runs around the clock, every day of the year. The 24/7 availability of the crypto markets may be one reason why crypto is so volatile. As decades of research on the stock market has shown, investors often succumb to emotional impulses that can drive their investment behavior. Time off can help restore a sense of control and order.

8. Diversification

Many investors aim to build a portfolio with diversified holdings that perform differently in different markets. In general, stocks often perform in correlation with the broader economy and are impacted by factors like inflation, unemployment rates, interest rates, and more.

Some proponents of cryptocurrency believe that it’s a non-correlated asset, meaning that this asset class doesn’t react to market events like traditional securities such as stock and bonds. Some also believe that it could act as a hedge against inflation, making it a valuable counterweight in a portfolio that has more inflation-sensitive assets.

Pros and Cons of Investing in Crypto

The question of investing in crypto vs. stocks comes down to the advantages and disadvantages of each, and what matters to your goals and risk tolerance.

Pros

Crypto is a new and, for some investors, an exciting asset class with many potential opportunities. It’s driven by cutting-edge technology, which is itself driving many new digital assets and innovations.

When the cryptosphere first launched with Bitcoin in 2009, it was considered an outlier. Now owning crypto is key to participating in nascent digital economies, like Web 3.0.
While investors can buy and sell stalwarts like Bitcoin, Litecoin, Ethereum, Dogecoin, Solana, and others, there are thousands of newer, smaller coins that may bring new technologies and new opportunities.

That makes for a market with sudden outsize gains (as well as stomach-churning losses), and the endless promise of new frontiers.

Cons

Speaking of sudden losses, one of the big disadvantages to investing in crypto is how vulnerable the technology can be to cyber attacks. Entire coins have been wiped out, billions of dollars have been lost (maybe more), and the truth is that until there are real crypto regulations on the books, those kinds of risks are going to be endemic to the crypto space.

The cost of owning and trading crypto is also unpredictable, thanks to the fluctuating costs on different exchanges and crypto networks. Just completing transactions on different networks can come with hidden costs.

Pros and Cons of Investing in Crypto

Pros

Cons

Potential for big gainsPotential for huge losses
Exciting new technology, essential for Web 3.0 and other innovationsHighly unregulated and vulnerable to cyber attacks
Opportunity to invest in new coinsCoins can lose value and disappear

Pros and Cons of Investing in Stocks

Stocks may seem old-school next to crypto, but after hundreds of years the stock markets aren’t going anywhere, and investing in stocks vs. crypto still offers some advantages (as well as some risks).

Pros

Investors who put their money into stocks enjoy the benefits of an asset class that’s long established and highly regulated. This also makes trading stocks simpler and more straightforward. It’s almost impossible to “lose” stocks you own, because of guardrails that protect investors, thanks to existing structures and regulations.

While stocks can be volatile and risky, overall stocks may be less vulnerable to hackers. Their value doesn’t hinge only on digital functionality, but the performance of an underlying entity — the company the stock represents. Therefore stocks have intrinsic value.

Cons

While the swings of the stock market still occur, some investors now handle that volatility by investing in stocks for the long term. You’re less likely to see wild gains in the stock market, the way you are with the crypto market.

Stock investors may not be as vulnerable to cyber attacks and hacks, compared with crypto investors, but there are plenty of vulnerabilities in the existing markets. The stock market is highly complex, and new securities and investment products enter the market frequently — think robo advisors, various derivatives, and more — with accompanying opportunities and risks.

Pros and Cons of Investing in Stocks

Pros

Cons

Wall Street is highly regulated, with many protections for investorsInvestors may not have the same kind of opportunities for outsize gains
Stocks are less vulnerable to cyber crimes and hacksThe stock market is highly complex, and new products pose new risks
Stocks have intrinsic value

The Takeaway

Stocks and cryptocurrency couldn’t be more different. Stocks offer investors a tangible piece of ownership in a company (even if it’s a tiny fraction of that company), whereas crypto assets don’t have intrinsic value. They are wholly digital and decentralized, which means they’re not regulated by a central authority like the Securities and Exchange Commission, which is one of the many agencies that help oversee the stock market and keep it safe for investors.

That said, of course, cryptocurrencies are new and exciting investments that present many opportunities that stocks, being more traditional, may not.

To some degree, investors can benefit from investing in both stocks and crypto, especially these days. When compared with crypto, stocks now seem like a fairly steady long-term play. And investing in crypto is going to be necessary in order to take part in the growing global digital economies, like Web 3.0.

If you’re ready to start building a portfolio with stocks or cryptocurrency — or both — one great way to get started is by opening an Active Invest account with SoFi Invest. You can buy stocks, ETFs, fractional shares, IPO shares — and you can set up a crypto trading account as well, to trade crypto any time, 24/7.

Trade crypto and get up to $100 in bitcoin! (Offer is available through 12/31/22; terms apply.)

FAQ

Does cryptocurrency work like stocks?

No. Cryptocurrencies are bought and sold on crypto exchanges; the fees are unpredictable; and many types of crypto are so new they don’t have a track record, and it’s hard to establish their value. Stocks are well established and highly regulated securities that can be bought and sold via a traditional brokerage or app, in a variety of forms — including index funds and exchange-traded funds, and more.

Is crypto a better investment than stocks?

It depends on your priorities. If you’re looking for super high-risk, potentially high-return investments — and you’re willing to face big losses — crypto might be your bag. If you prefer a long-term investment with less risk and the potential for relatively steady average returns over time, stocks could be your friend.

How can crypto markets impact stock markets?

As of September 2022, what happens in the crypto markets seems somewhat correlated with what happens in the stock markets. Meaning, investors in each market are behaving similarly – as when the Fed raised interest rates, and both stock values and crypto values dropped. That said, it’s not clear that one market impacts the other, but that investors handle stocks and crypto in similar ways.


Photo credit: iStock/ljubaphoto

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A., or SoFi Lending Corp.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2022. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

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What Companies Accept Dogecoin and Other Cryptos as Payment?

Which Companies Accept Dogecoin and Other Cryptos as Payment?

A growing list of businesses accept cryptocurrencies like Dogecoin as a form of payment, especially as crypto itself becomes more widespread and commonplace. Though Dogecoin is not as big or as popular as Bitcoin or Ethereum, it’s still gaining more and more acceptance among merchants and service providers.

That’s a list that includes airlines, professional sports teams, and many more.

Recommended: A Guide to Meme Stock Investing

Dogecoin Basics

Dogecoin, as of September 24, 2022, is valued at around $0.06, with a total market cap of more than $8.5 billion. While this may seem like a lot — and enough to put it in the cryptocurrency top ten, according to CoinMarketCap — it’s still relatively small compared to Bitcoin (valued at $19,000 with a $366 billion market cap) or Ethereum ($1,345, $164.4 billion). Yet, it’s still one of the top cryptos by market cap.

Recommended: SoFi’s Crypto Guide for Beginners

History of Dogecoin

Jackson Palmer created Dogecoin in 2013 as both a reference to the then-popular meme and to what was then seen as an explosion of interest in Bitcoin. In early 2018, during another huge runup in crypto prices, Dogecoin’s market cap reached more than $1 billion, which may have been seen as extreme at the time (it would fall back down to around $400 million), but was nothing compared to what was coming.

Between April and May of 2021, Dogecoin’s market cap rose from around $8 billion to almost $95 billion. After values dropped in 2022, it’s currently at around $8.5 billion. So, if you had hopes to see Dogecoin to $100, or to the moon, those hopes have likely been dashed for now.

Recommended: How to Read Crypto Charts

While traders can buy and sell Dogecoin like any cryptocurrency on mainstream exchanges like Coinbase, it does not have the buzzing hive of developer activity and use in businesses that others do. That’s slowly starting to change.

More than 240,000 people have signed a Change.org petition aimed at getting Amazon to start accepting the coin. While that request hasn’t gotten much traction, there are some businesses that have decided to start accepting it as a means of payment.

How Dogecoin Works

As for how Dogecoin actually works, it’s more or less the same as Bitcoin. Dogecoin is a virtual currency that lives on a blockchain network, operating off of a proof-of-work protocol. That means that participants on the blockchain network can mine new coins.

Transactions are verified and recorded on the blockchain, and new coins are produced, or mined, every minute.

15 Companies That Accept Dogecoin as Payment in 2022

1. The Dallas Mavericks

The NBA basketball team, owned by billionaire Mark Cuban, is not afraid of the occasional stunt to get attention. In March 2021, the basketball team said in an official statement that it would be accepting Dogecoin for both tickets and merchandise. Cuban explained the reasoning for the decision:

   “The Mavericks have decided to accept Dogecoin as payment for Mavs tickets and merchandise for one very important, earth-shattering reason, because we can! Because we can, we have chosen to do so. We have chosen to do so because sometimes in business you have to do things that are fun, engaging and hopefully generate a lot of PR. So we will take Dogecoin, today, tomorrow and possibly forever more. For those of you who would like to learn more about Dogecoin we strongly encourage you to talk to your teenagers who are on TikTok and ask them about it. They will be able to explain it all to you”

There are some other sports teams that accept cryptocurrencies, too, like the NBA’s Sacramento Kings, the NFL’s Tennessee Titans, the NHL’s San Jose Sharks, and MLB’s Oakland Athletics.

2. AirBaltic

Around the same time the Mavericks said they would begin accepting Dogecoin as payment, the European airline AirBaltic made a similar announcement.

“As an innovative airline, we always strive to search for ways to improve the customer experience starting from the booking process. Over the years around 1,000 clients have used the payment option, which may not seem like a lot, but still offers passengers a unique payment option hard to find elsewhere,” the airline’s CEO Martin Gauss said in a statement.

AirBaltic is majority owned by the Latvian state, adding an official level of approval to a cryptocurrency that, as its founder has said whenever anyone would ask, is meant to be a joke.

3. Newegg

The electronics online retailer said in April 2021 that it would start accepting Dogecoin. “We’re committed to making it easy for our customers to shop however works best for them, and that means letting them complete transactions with the payment method that suits them best. To that end, we’re happy to give Dogecoin fans an easy way to shop online for tech,” a Newegg executive said in a statement.

4. The Kessler Collection

The Kessler Collection owns several luxury hotels throughout the United States. In March 2021, the company said it would “accept Bitcoin, Ethereum, Dogecoin.” The company specifically pointed to cryptocurrencies hitting “an all-time high” as a justification for the expansion of the number of currencies they would accept.

5. Twitch

Twitch is a digital streaming service traditionally used by gamers to broadcast their gaming and associated commentary. Though it’s owned by Amazon, which does not accept Dogecoin or other cryptocurrencies as a valid form of payment, you can use Dogecoin on Twitch. Users can tip streamers in a variety of cryptos, in fact.

6. Tesla

As of early 2022, electric car maker Tesla accepts crypto. Tesla accepts Dogecoin, too, but not all Tesla products are eligible for purchase with crypto, though, so take note before you try and pre-order a Cybertruck with your DOGE holdings.

7. Keys4Coins

Keys4Coins is a digital PC games store, which sells a number of different products and services in the gaming sphere. As the name of the company suggests, it does take coins (crypto coins) as a form of payment, too, including Dogecoin.

8. AMC

You can also buy movie tickets at AMC Theaters with Dogecoin and Shiba Inu, using the company’s mobile app. AMC’s leadership made the announcement in early 2022, and have said that they will accept other cryptocurrencies in the future, too.

9. GameStop

GameStop has embraced its place in the meme space, and has started accepting meme coins, like Dogecoin, as a form of payment. GameStop is getting deeper into the crypto space with NFTs and metaverse projects, too, and is also accepting a short list of other cryptos as well.

10. Bitrefill

Bitrefill is a digital platform that allows customers to buy gift cards or even cell phone air time with crypto. Given the wide range of gift cards available from the retailer, it could be a good way to get a lot of utility from your crypto holdings. Bitrefill accepts Dogecoin, and several other cryptos.

11. Sling TV

You can even pay for your monthly television subscription with Dogecoin, as Sling TV has partnered with a crypto payment processor to accept crypto payments. Along with Dogecoin, you can pay for Sling TV with Bitcoin, Bitcoin Cash, and Ethereum.

12. Menufy

Menufy is an online ordering platform designed for use by restaurants. It allows restaurants to accept cryptocurrency payments through a crypto payment processor. There are thirteen in all, including Dogecoin.

13. ExpressVPN

For those seeking to cover their tracks on the internet, a VPN can go a long way. And now, you can pay for a VPN service using crypto like Dogecoin. ExpressVPN accepts several cryptocurrencies in exchange for using its service.

14. Sheetz

Sheetz, a chain of convenience stores in the eastern United States, is unique among businesses of its type in that it will accept crypto at the gas pump and in the store. That includes Dogecoin, along with Bitcoin and Ethereum.

15. Various Non-Profits

There are many non-profit organizations that allow people to donate money to, or pay them using Dogecoin and cryptocurrency. An internet search will yield many, many results.

Bitcoin

Dogecoin

Ethereum

Tether

Bitcoin Cash

NeweggYesYesYesNoYes
Dallas MavericksYesYesNoNoNo
The Kessler CollectionYesYesYesNoNo
AirBalticYesYesYesNoYes
TwitchYesYesYesNoYes
TeslaNoYesNoNoNo
Keys4CoinsYesYesYesNoYes
AMCYesYesYesNoYes
GameStopYesYesYesNoNo
SheetzYesYesYesNoYes
BitrefillYesYesYesYesNo
Sling TVYesYesYesNoYes
MenufyYesYesYesNoYes
ExpressVPNYesYesYesNoNo

Pros and Cons of Using Dogecoin for Purchases

There are some considerations, or pros and cons, to take into account when using Dogecoin to make purchases.

On the pro side, Dogecoin’s user base is growing, and so is the potential number of businesses that might accept it. And since Dogecoin is modeled after Bitcoin, it’s relatively easy to transact. It’s also easy to exchange for fiat or other cryptocurrencies, as Dogecoin is listed on most major crypto exchanges.

Conversely, though it’s become more popular, Dogecoin is still not accepted by many businesses, relatively speaking. It’s also worth noting that it’s an incredibly volatile asset, and could lose value before you’re able to make a purchase. Finally, there’s no supply cap for Dogecoin, which could affect its value going forward.

Pros & Cons of Making Purchases With Dogecoin

Pros

Cons

Growing in popularityStill not widely accepted
Easy to transactFluctuations in value
Easy to exchangeNo supply cap

Buying Crypto Today

While merchants have not begun accepting any types of cryptocurrencies, many do accept Dogecoin. Given its volatility, however, it can be hard to know whether using Dogecoin to make purchases will end up saving or costing the buyer money.

If you’re interested in buying Dogecoin or other cryptocurrencies, a great way to get started is an online crypto trading platform. With SoFi, you can use the app to buy cryptocurrency, including coins like Bitcoin, Ether, Dogecoin (unavailable in New York), Cardano, Litecoin, and a wide selection of other cryptos.

Trade crypto and get up to $100 in bitcoin! (Offer is available through 12/31/22; terms apply.)

FAQ

Which retailers will accept Dogecoin?

Many retailers accept Dogecoin, such as Sheetz, GameStop, and Newegg. It’s likely that more will in the future, too.

How many companies accept Dogecoin as payment?

It’s hard to pin down just how many companies accept Dogecoin as payment, but the list is likely growing by the day. As cryptocurrency becomes more commonplace, it’s likely that more companies will accept it as payment, and Dogecoin may be among those cryptos.

Does Amazon take Dogecoin?

No, Amazon does not accept Dogecoin as a form of payment. In fact, it doesn’t accept any cryptocurrencies at all.


Photo credit: iStock/Ksenia Raykova

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A., or SoFi Lending Corp.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2022. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

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12 Benefits of Cryptocurrency in 2022

14 Benefits of Cryptocurrency in 2022

The primary benefit of Bitcoin and most other cryptocurrencies based on blockchain technology is that many of them lack a central authority, payment processor, or company owner. From this stems several other benefits, such as ease of transactions, potential for higher return for traders, and even relatively good network security.

Since crypto networks tend to be peer-to-peer, meaning that people can transact directly with one another. Let’s look at some of the advantages of cryptocurrency in this crypto guide.

Benefits of Owning Crypto in 2022

1. Easy Transactions

Crypto transactions can be made easily, generally at a low cost, and in a relatively private manner. Using a smartphone app, hardware wallet, or exchange wallet, almost anyone can send and receive a variety of cryptocurrencies.

Some types of cryptocurrencies, including Bitcoin, Litecoin, and Ethereum, can be purchased with cash at a Bitcoin ATM. A bank account isn’t always required to use crypto, so it’s possible that someone could buy Bitcoin at an ATM using cash, then send those coins to their digital wallet or phone. This may be a huge advantage for people who might lack access to the traditional financial system.

2. Relatively Secure

Because cryptocurrencies are rooted in cryptography and blockchain security, decentralized cryptocurrencies tend to make for secure forms of payment. As such, the relative security of cryptos may be one of the biggest benefits for users.

Crypto security, in large part, is determined by hash rate. The higher the hash rate, the more computing power is required to compromise the network. Bitcoin is considered to be the most secure cryptocurrency, as it tends to have a higher hash rate than other networks.

Note, though, that using a crypto exchange is only as secure as the exchange itself, however. Most incidents of crypto being hacked involve exchanges being hacked or users making mistakes, like falling for phishing scams.

3. Short Settlement Times and Low Fees

While some people may only want to invest in cryptocurrency to take advantage of (prospective) price appreciation, others might find benefit in the ability to use crypto as a medium of exchange.

Bitcoin and Ether transactions can range from a few cents, to several dollars or more. Other cryptocurrencies, like Litecoin, XRP, and others, might be able to be sent for less. Payments for most cryptos settle within minutes, and some within seconds. Conversely, wire transfers at banks can cost significantly more, and often take three to five business days to settle.

4. Exponential Industry Growth

The cryptocurrency industry has been one of the fastest-growing markets that most of us have seen in our lifetimes, especially since the industry got its start with the debut of Bitcoin back in 2009. The total market cap of the cryptocurrency market in 2013 was about $1.6 billion. By September 2022, it’s worth more than $930 billion. That, too, is including the so-called “crypto winter” that the crypto markets experienced for much of 2022.

So, while the industry as a whole has seen incredible growth over the past decade, it’s important to keep in mind that markets ebb and flow.

5. The Possibility of Outsized Returns

Bitcoin has been one of the best-performing assets of the last 13 years. When it debuted in 2009, Bitcoin essentially had no value, but in the following years, it would rise to a fraction of a penny, and then eventually to tens of thousands of dollars. This represents millions of percentage points’ worth of gains. By comparison, the S&P 500 index of stocks returns an average of about 8% per year.

Some altcoins have outperformed Bitcoin by wide margins at times, although many of those later saw their prices collapse. Gains like these might be among the most well-known cryptocurrency benefits. The losses, on the other hand, may be among the most well-known drawbacks. And that’s important to note, as crypto prices have fallen quite a bit, as of late. For example, during 2022, Bitcoin’s price has fallen by more than 60% as of September.

That type of volatility has characterized prices in the crypto space, which has been one of the key benefits of cryptocurrency for day traders and speculators, too. Taking advantage of the fluctuations in price can help traders earn returns, even if prices fall.

6. More Private Transactions

Privacy can be a big benefit of cryptocurrency, but crypto isn’t always as private as some people might think. Blockchains create a public ledger that records all transactions forever. While this ledger only shows wallet addresses, if an observer can connect a user’s identity to a specific wallet, then tracking transactions becomes possible.

While it’s worth noting that most crypto transactions are pseudonymous, there are ways to make more anonymous transactions. Coin mixing services group transactions together in a way that makes it hard to pick them apart from one another, which can make it difficult to track for outside observers. Individuals who run a full node also make their transactions more opaque because observers can’t always tell if the transactions running through the node were sent by the person running the node or by someone else.

Methods like these are for more advanced users and could prove difficult for those new to crypto. So while absolute privacy is really not one of the main positives of cryptocurrency, transactions are still generally more private than using fiat currency with third-party payment processors.

Up to $100 in bitcoin2 – just for you.

With 30 coins available, our app offers a secure way to trade crypto 24/7.


7. Portfolio Diversification

Cryptocurrency has become known as a non-correlated asset class. Theoretically, crypto markets largely function independently of other markets, and their price action tends to be determined by factors other than those affecting stocks, bonds, and commodities. Though that theory has been tested this year, as assets of all types of slipped, including cryptocurrencies. It’s worth noting, though, that during the last few years, cryptos have begun to sometimes trade in tandem with stocks for short periods of time.

So, in terms of diversification, cryptocurrencies offer investors another vehicle with which to try and grow their money outside of stocks, ETFs, or bonds. Crypto has its own unique risks, but it is another avenue for potential returns for investors.

8. Potential Inflation Hedge

Mineable cryptocurrencies with a limited supply cap, like Bitcoin, Litecoin, and Monero, to name a few, were traditionally thought to be good hedges against inflation. Because monetary inflation can occur when central banks and governments print more money (increasing the supply), things that are more scarce tend to appreciate in value.

With more and more new dollars chasing fewer and fewer coins, the price of these fixed-supply coins as measured in dollars has a higher chance of going up. Additionally, the Bitcoin protocol, for example, is also designed to keep those coins scarce regardless of what happens with monetary policy.

The potential of cryptos to stand up to inflation has been yet another test this year, as we’ve experienced higher rates of inflation than in several decades. As mentioned, crypto prices have fallen, but it’s hard to say how much of that has to do with inflation. Crypto may still serve as a hedge, but it may not be as ironclad of a concept as it once was.

9. Cross-Border Payments

Cryptocurrencies have no regard for national borders. An individual in one country can send coins to someone in a different country without any added difficulty. With traditional financial services, getting funds across international borders can take a long time and come with hefty fees. In some cases, doing so might not even be possible due to regulations, sanctions, or tensions between specific countries.

But again, cryptocurrency gets around all of that, as users can engage in peer-to-peer transactions from anywhere in the world.

10. A More Inclusive Financial System

Some of the benefits of cryptocurrency extend to people who don’t have access to, or perhaps don’t trust, the traditional financial system. Due to its decentralized and permission-less nature, one of the benefits of cryptocurrency is that anyone can participate outside of that system.

People don’t need permission from any financial authority or government to use the crypto ecosystem. (Though it’s worth noting that Bitcoin mining is banned in China, and that there may be other local rules and regulations to take not of.) Participants also don’t necessarily need to have a bank account. There are billions of people today who are “unbanked,” meaning they have no access to the financial system, including bank accounts. With crypto, however, the only thing those people need is a smartphone, and they can essentially become their own bank.

11. Transactional Freedom

One of the great benefits of crypto is that it can be used to exchange value between two parties. This can be done independently of any third-party, making the transaction about as free as it can get. It’s similar to handing a dollar bill to a friend on the street.

Banks, or other payment processors, can choose to cut off services to anyone for any reason. This can make things difficult for some journalists, political dissidents, or other individuals working in nations with oppressive government regimes. Because there is no central authority governing Bitcoin or most other cryptocurrencies, it’s very difficult to stop anyone from using them.

12. Always-Open Markets

Stock markets, like the New York Stock Exchange (NYSE), are only open on weekdays during the regular business hours of 9:30 am to 4:30 pm Eastern Time. During nights, weekends, and on holidays, most traditional financial markets are not open for business.

Crypto markets, on the other hand, operate 24 hours a day, seven days a week, without exception. Some of the only things that could interrupt a person’s ability to trade cryptocurrency would be a power outage, internet outage, or centralized exchange outage.

13. Adaptability

Some cryptocurrency projects take measures to become more efficient or resource-intensive. That’s a big difference between, say, the traditional banking system, which is often stuck utilizing outdated technologies and protocols.

One example: “The Merge,” which involved Ethereum moving from a Proof-of-Work model to a Proof-of-Stake model, effectively ending mining operations, and instead, adopting a much more efficient operating model. The ability of cryptos to change things up in a big way, and on a widespread, operating level, means that it has another advantage over traditional systems.

14. Specialization

Some cryptos can be designed specifically for certain projects or uses. Some cryptos, for instance, are designed to work with metaverse projects or games, and can be used to help create in-game assets or tokens.

Others, like Ripple (XRP), are designed for use by businesses to make transactions. There are myriad ways crypto can be designed or adapted for specific uses.

The Takeaway

Transactional freedom, security, and ease of transaction are among the most important advantages of cryptocurrency. Many cryptos are designed to have unique advantages over fiat currencies or the traditional banking system, even if they don’t have widespread use or adoption yet.

Of course, there are potential flaws as well — volatility being a major downside. As with anything, though, those interested in buying, selling, and trading crypto would be wise to do their research before getting involved in the crypto market.

If you’re ready to invest in crypto, consider setting up a crypto trading account from SoFi Invest®. You can buy and sell Bitcoin, Ethereum, Litecoin, Dogecoin, Cardano and more.

Trade crypto and get up to $100 in bitcoin! (Offer is available through 12/31/22; terms apply.)

FAQ

Is cryptocurrency a good investment?

Cryptocurrency can be a worthwhile investment, and has numerous benefits for investors. It is, however, a speculative investment, and there are lots of risks unique to the crypto markets. As such, investors should do their homework before getting in the market.

What should you know before trading cryptocurrency?

There are many considerations to take into account before trading crypto, including the fact that there are numerous exchanges, ways to trade, and coins on the market. Prospective traders should also know that fees may be involved, and that crypto is a highly volatile asset class.

How do I weigh up the pros and cons of each cryptocurrency?

Many cryptocurrencies are similar, but most are their own, individual projects. As such, researching how they each work, what their intended use is, and what the potential drawbacks are for each crypto is a good place to start when weighing pros and cons.


Photo credit: iStock/insta_photos

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A., or SoFi Lending Corp.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2022. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

First Trade AmountBonus Payout
LowHigh
$50$99.99$10
$100$499.99$15
$500$4,999.99$50
$5,000+$100

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