The state of crypto-based retirement with Alto

Alto is a Tennessee-based alternative investments platform aiming to unlock access to alternatives for all. Founded in 2016, Alto has raised more than $70M in venture funding, including $40M in a 2022 Series B round that saw participation from Advance Venture Partners, Unusual Ventures, Gaingels, and others.

Alto partners with Coinbase to power its CryptoIRA solution, which allows Alto users to buy and sell crypto tax-free through their Roth IRA, or tax-deferred through a SEP or traditional IRA. These two platforms have doubled down on their partnership, recently announcing reduced-fee services on Alto for Coinbase One users.

In an interview with The Financial Revolutionist in the wake of this announcement, and in light of major regulatory interventions in the crypto space over the past year, Eric Satz, Founder & CEO of Alto, outlines the current state of the crypto sector, describes the retirement-focused practices of crypto holders, and previews Alto’s six-month product pipeline.

This interview has been edited for length and clarity.

The Financial Revolutionist: Given that Alto straddles the alternative-investment world and the retirement-planning world, I’m curious how recent legal interventions in crypto affect your platform. Where does that leave consumers who are interested in using these investment vehicles for their retirement goals?

Eric Satz: The good news is, if we take a look at our clients’ investment portfolios, those with crypto IRA accounts are—give or take—30% in bitcoin, 30% in ethereum, and 30% in cash. Most people have nothing besides those three assets. A minority of folks have bought up the long tail.

I personally do not believe crypto is going away. I believe in the long-term viability of both bitcoin and ether. I think over time, which to me is another five to ten years, these are going to prove to be valuable assets. So I don't think the long-term viability of crypto in a retirement account is in any way jeopardized.

Are people in a hurry to add crypto to their portfolios today like they were two years ago? No. But it's also creating really interesting buying opportunities for lots of other folks. And I think the SEC has made it clear that bitcoin is not a security, and I think the train left the station on ethereum. Everything else I think is a jump ball, and we're going to learn a lot over time.

Do you communicate that kind of outlook to Alto’s users? If so, how?

As the administrator, it's not my role to pass judgment on the investment, and it's certainly not my role to tell them to do something. I can only be supportive of that which is legal.

Of course—more in terms of communicating the legal status and future of an asset they’ve bought through Alto.

Coinbase is our liquidity provider and our exchange partner. So we can only offer what they offer. So if in reaction to the SEC they say they’re no longer going to support trading a coin, then Alto says it’s no longer going to support trading it. We're not running our own exchange; what we have always done and what we continue to do is to facilitate investments for our clients so that they can build the diversified portfolio that they're interested in. It's not to promote or to criticize.

You mentioned that the majority of account holders are primarily interested in the big two cryptocurrencies and fiat currency rather than the tail end of smaller players. Have you seen any change in that over over time?

Yeah, so very few people were holding cash during the heyday. So I think the biggest change has been in that cash balance, where people are waiting for chances to get in at what they believe to be attractive levels or prices. So there are more buys than sells, and people are sitting on more cash than they used to.

I have two kids: When I think about crypto from a father's investment perspective, what I don't want my kids to do is try to get rich quick. What I think was happening with the tail end of these crypto assets was a lot of people trying to better their financial situation very quickly.

Do you see people treating Alto as a short-term trade platform?

That activity has stopped. The people who are in now are believers.

Given the range of interventions that have happened in the crypto space from a regulatory perspective over the past year, what future do you see for crypto in terms of the institutions within it? Are you seeing sort of a purification, where more compliance-minded players are leading the charge?

Crypto only represents 10% of our business. We have a very solid yet direct offering that allows an investor to buy and sell any of 200-plus crypto assets available on Coinbase. We don't do derivatives, we don't do options, we don't do lending, we don't do staking. It's rock-solid vanilla ice cream.

I think we need to let some of the legal mess clean itself up over the next couple of years before we determine that we need to make all kinds of other investments in the space. And I'm not opposed to making those investments, but timing is important. I don't think they're needed right now. In fact, what I think you see is our competitors in the space who only did crypto now trying to get into other alternatives.

With that in mind, what do you see for Alto in the coming year?

Our vision has always been alternatives for all. And with that, we got our broker-dealer license within the last six months, and we’ve hired our Alto securities team. We're now launching our first Alto marketplace deal; we're now, for the first time, offering people who meet certain investor criteria to invest in farmland. And that’s the first of what will be five other deals coming through the end of 2023.