How to Invest in a Bitcoin IRA: 5 Options to Let You Invest Today

Bitcoin investment

Most investors know there is no better time to start investing for retirement than today. What many investors do not know, however, is that it is possible to put bitcoin as a holding into your retirement investment account.

Here’s a list of the different bitcoin retirement investment options, as well as the opportunities and risks of investing in the digital currency as part of your retirement portfolio.

Bitcoin Retirement Investment Options

Fortunately for bitcoin investors who would like to add the digital currency to their retirement portfolios, there are several available options in the U.S.

Investment OptionFeeTax BenefitsMinimum InvestmentYou Hold Your Coins?Launched in
BitcoinIRA15 percent upfrontYes$20,000 No2016
CoinIRA10 - 15 percent upfrontYes$30,000 No2017
Broad Financial Bitcoin IRA$1,395 YesNoneYou Can Choose2004
Bitcoin Investment Trust2 percent p.a.Yes, if shares are put into an IRA$50,000 No2013
Buy & Hold YourselfOnly exchange purchase feeNoNoneYes2009

The BitcoinIRA

First, you have the option to invest in the BitcoinIRA, the first IRA of this sort. The BitcoinIRA does exactly what it says on the box. This innovative retirement investment fund was launched in 2016 and provides investors with the opportunity to invest in bitcoin as part of their retirement investment strategy. Through using BitcoinIRA’s services, investors can choose to place bitcoin holdings into a self-directed traditional IRA or a Roth IRA.

BitcoinIRA customers can also choose from a range of altcoins including Ether (ETH) and Ripple (XRP). The minimum investment is $20,000.

The BitcoinIRA is open to investors under 70 and a half years of age and provides the same tax benefits that “normal” IRAs offer. However, it is important to note that the company charges a substantial 15 percent upfront fee on your investment.

CoinIRA

You could also use CoinIRA to add bitcoin exposure to your retirement fund. California-based CoinIRA was founded in 2017 as a subsidiary of Goldco to provide investors with digital currency retirement account services.

CoinIRA offers IRAs and 401(k) packages for bitcoin (BTC), Litecoin (LTC), Ether (ETH), Ether Classic (ETC), Bitcoin Cash (BCH), and Ripple (XRP). The CoinIRA has a minimum investment size of $30,000 and charges a 10 to 15 percent one-off fee for its services.

Broad Financial

New York-based financial services firm Broad Financial specializes in self-directed IRAs and Solo 401(k)s and offers its services in all 50 states.

Broad Financial offers a self-directed Bitcoin IRA that costs investors a flat fee of $1,395 (as opposed to a percentage fee like BitcoinIRA or CoinIRA charges) and provides more flexibility and fund control to its customers. Investors in Broad Financial’s Bitcoin IRA can hold their own private keys, choose on what exchange they want to trade, and invest in any digital currency they desire. This Bitcoin IRA has no minimum investment requirement.

The Bitcoin Investment Trust

Alternatively, you could also purchase shares in Grayscale’s Bitcoin Investment Trust (GBTC), which is an over-the-counter traded trust that invests exclusively in the digital currency bitcoin.

Purchasing shares in the Bitcoin Investment Trust allows you to gain exposure to bitcoin without having to buy and store the digital currency yourself. Furthermore, you have the option to hold shares in the Bitcoin Investment Trust in certain IRAs and Roth IRAs, which make them an eligible investment for your retirement planning.

The Bitcoin Investment Trust was launched in 2013 by the Digital Currency Group-owned investment management company Grayscale Investments LLC and comes with no minimum investment requirements to purchase shares. The fund charges a two percent annual management fee and its ticker is GBTC.

However, as it is not listed on an exchange, you will first need to find a broker who can purchase shares for you in the over-the-counter market so that you can put the holding into your retirement portfolio.

Buy and Hold Bitcoin Yourself

Finally, you can make a bitcoin investment by simply buying bitcoin online yourself and storing your coin securely in a bitcoin wallet. While this is strictly speaking not an IRA investment, some people might prefer to invest in bitcoin directly and save on the management fees charged by IRA providers.

The key to holding bitcoin long-term is to make sure you store your coin in so-called cold storage, which means storing them offline where no hackers can gain access to your holdings. You can store your bitcoin offline by using a hardware wallet, a paper wallet, or a desktop wallet of a computer you only connect to the Internet when you want to transact using your digital coins.

When buying and holding bitcoin as an investment yourself, however, you need to be aware that you will not receive the same tax benefits you would have if you had invested in the BitcoinIRA or held shares of the Bitcoin Investment Trust in an IRA. Your bitcoin holdings would be taxed at your standard capital gains tax percentage. This, of course, could change should new bitcoin taxation laws be passed by Congress in the future.

Should You Hold Bitcoin in Your Retirement Fund?

While it is good to know that the option exists to add bitcoin to your retirement investment fund, the question is whether that is actually a good idea. In reality, the opportunities and risks of investing in bitcoin are the same whether you intend to invest in the digital currency for a year, ten years, or until you want to cash out your retirement fund.

Bitcoin IRA

Opportunities

The “why you should invest in bitcoin” story is pretty straightforward. Bitcoin provides individuals around the world with the ability to make online payments and money transfers at a low cost and without the need for an intermediary. Due to this value proposition, bitcoin has grown into an alternative digital currency with a market capitalization of over $60 billion that is being used across the globe. Should this trend continue and should bitcoin become a major currency that can compete with fiat currencies in the global foreign exchange market, then the value of bitcoin could continue to increase substantially as its supply is limited to 21 million bitcoin.

In other words, if bitcoin adoption continues to grow as it has done in the last eight years, then the price could continue to rise since its supply is limited.

Risks

While the story for investing in bitcoin is rather compelling, it is important to note that there are also several risks that could undermine bitcoin’s positive price development in the future.

The risks of making a bitcoin investment can be categorized into three key areas: regulatory, competitive, and technological.

First, there is the potential of new regulatory changes that could have an adverse effect on the price of bitcoin. Bitcoin is currently banned in some countries, while other countries, such as Japan, have decided to legalize the use of bitcoin as a payment method. Should regulators and lawmakers in major economies such as the U.S., the U.K., and South Korea decide to change their current neutral stance to a negative stance towards bitcoin and enact laws that would make transacting in bitcoin more difficult, this could likely affect the price of bitcoin negatively.

Second, bitcoin also has competition, as there are 2,000+ other digital assets on the market today. Hence, there is the chance that a better digital currency could overtake bitcoin and become the new go-to global digital currency of the future. As bitcoin has the first-mover advantage and brand power, this is rather unlikely in the near future. However, if a digital currency that offers faster transaction speeds and lower fees surpasses bitcoin in popularity, bitcoin’s use and value could decline.

Third, there are also technological risks involved with investing in bitcoin. Currently, the Bitcoin network has grown in size much faster than initially expected due to the fast increase in adoption. While this has worked well for the price of bitcoin, it has caused the bitcoin network to slow down. That means it takes longer for transactions to be processed. The bitcoin community is currently in the process of implementing updates to the bitcoin protocol that aim to fix the bitcoin network’s scalability issues. However, should none of the fixes be successfully implemented, bitcoin’s usefulness as a transactional currency could fade, which could have a negative effect on its price in the future.

If you believe that bitcoin will continue to grow as a store of value and an alternative digital currency, then adding small exposure to the digital currency into your retirement portfolio may be the right move. Should bitcoin adoption continue to grow globally as it has done since its inception, then the price of the digital asset could likely continue to increase substantially, which means it could turn into an excellent returns booster in your portfolio.

However, when investing in a high risk/high return asset class such as bitcoin, it is always wise never to invest more than you can afford to lose. This is especially the case when you are investing for your retirement.

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