Coinbase will allow people to put part of their paychecks in crypto

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Coinbase signage in Times Square in New York City during the company’s initial public offering on the Nasdaq on April 14, 2021.

Robert Nickelsberg | Getty Images

Investing consistently in cryptocurrency just got a whole lot easier.

In September, Coinbase announced that its users will soon be able to set up direct deposit with any percentage of their paychecks and will be able to choose whether the money is deposited in US dollars or one of over 100 crypto-coins. currencies available for exchange, free of charge.

The company said the idea for direct deposit came from users who said making frequent transfers was inconvenient and time consuming.

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“With direct deposit, customers can more easily access our crypto-first financial services and be ready for any transaction or purchase,” said Max Branzburg, vice president of products at Coinbase, in a September 27 blog post. .

Direct deposit will start rolling out at the end of the month and will continue until the end of the year, according to the company.

Advantage of direct deposits

Being paid primarily in cryptocurrency – or receiving part of the salary in the asset – makes sense to some people.

“We are entering the cryptocurrency phase where there is a demand for people who want to be paid in digital assets,” said Douglas Boneparth, Certified Financial Planner and President of Bone Fide Wealth in New York City. “This will obviously make it easier for people to put more of their money into cryptocurrencies, and good or bad is really determined by the user and their money preferences.”

The direct deposit feature will help some investors treat cryptocurrency like a 401 (k) plan, something they are constantly investing money in for a long-term investment. This especially makes sense for those looking for an average dollar cost, an investment strategy that puts smaller amounts of money in an asset over a longer period of time instead of all at once.

On the other hand, it will also be useful for people who are actively transacting in cryptocurrencies, as they will not have to take the extra step of depositing their money into their Coinbase accounts to make purchases or pay. invoices with parts.

Where to be careful

Owaki – Kulla | The image bank | Getty Images

Of course, converting your entire paycheck and getting paid only in cryptocurrency could be risky, according to Bonparth.

“Obviously getting paid in something volatile… can be a dangerous thing,” he said.

For example, if you get paid $ 2,000 in bitcoin and the cryptocurrency loses 20%, your paycheck is now worth $ 1,600.

Additionally, if you are new to investing in cryptocurrency, you should take the time to research the asset and decide if it makes sense to you before signing up for direct deposit. -he declares.

“It’s super exciting,” he said. “But despite all the excitement, you need to be vigilant and knowledgeable.”

How much of each paycheck do you need to deposit?

If you want to sign up for the direct deposit feature when it becomes available, there are a few things to consider before deciding what percentage of your paycheck you will send to crypto.

First, financial experts generally recommend that people have reached a few other financial milestones before investing money in volatile assets such as cryptocurrencies.

This includes things like having a solid retirement savings in a 401 (k) plan or an individual retirement account. You should also have emergency savings on hand – experts recommend three to six months of spending.

Next, financial experts usually advise investors interested in crypto to start with small amounts.

“Invest what you’re willing to lose – it’s almost like going to Vegas,” said Daniel Rodriguez, COO of Hill Wealth Strategies in Richmond, Va., Adding that he would recommend a small portion of his. salary.

But people who believe in cryptocurrency and have a higher tolerance for risk may want to put in larger portions.

For some, this could represent 5-10% of their investable assets, according to Bonparth. Others may want to invest even more, depending on their beliefs and overall financial situation.

“It’s not about whether they take the highest percentage; is to understand the risk associated with that and can they tolerate what will happen if it is volatile on the downside? ” he said.

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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.

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