Is Investing in Bitcoin IRA a Good Idea?

We all know how the 21st century saw the arrival of digital currencies rather than cryptocurrencies that took the financial markets by storm. Soon it gained immense popularity among the investors owing to its rising profits and long-term investment benefits.

Investing in bitcoin will help you create a stable life after retirement when it comes to financial stability. You can add some considerable assets to your existing ones. You can also start bitcoin trading with intelligent solutions like Bitiq Software for better ROI.

Bitcoin IRA

Do you know retirement holds a different portfolio along with the other portfolios? If you wish to invest in bitcoins for your life post superannuation, then you have to do it through Individual Self Retirement Accounts, which you have to regulate individually. As one of the first investment spaces, this area saw an investment of a whopping $400 million in client return investments as of March 2020.

We will discuss the various aspects of Bitcoin IRA, but first, we need to understand what it’s all about.

What does Bitcoin IRA refer to?

Cryptocurrencies do not have any particular Internal Revenue Service (IRS) to look after their functioning and development. Consequently, when the investors talk about Bitcoin Ira, they refer to a specific IRA consisting of Bitcoin or other cryptocurrencies amidst its portfolio holdings. As a self-directed IRA, the Bitcoin IRA facilitates investing in alternative assets like real estate, cryptocurrency, and physical gold.

From the financial year of 2014, the IRS considers Bitcoin and the other digital currencies part of retirement accounts. It can be in the form of the property, thus symbolizing that the coins are susceptible to taxation like other bonds and shares. The IRA holders should seek assistance from a custodian to make digital tokens a part of their retirement accounts. The major impediment for the investors in this area is finding a custodian who would consider Bitcoin in the IRA. However, the good news for investors endeavoring to commit bitcoin in an IRA is that the self-directed IRA more often takes cryptocurrencies as alternative assets.

The custodians and the other bitcoin companies that facilitate bitcoins in the IRA for investors gained immense popularity. Some of the preeminent leaders in this field are Bitcoin IRA, BitIRA, and Equity trust.

When can Bitcoin IRA achieve its true objective?

To begin with, bitcoin investments and especially in IRA, make sense only when you can tolerate risks and prepare yourself enough to deal with your gut swings. You have to assess your risk tolerance via a risk calculator. Only when your profile reflects the trait of aggressiveness can you risk your investments in Bitcoin.

Make sure that you have adequate preparation concerning the hefty expenditure for investing in bitcoin and IRA. It is opposite to the tax advantages that ordinary investors enjoy. Numerous miners charge fees under the banner of setup, transaction, maintenance, etc., along with various other minimums. Naturally, the speculative assets should not be more than 5% or 10% of the total investment portfolio for Bitcoins.

Decide on vouching for Bitcoin IRA only when you feel you are in the path of a comfortable retirement, with stable savings from other retirement accounts. If you consider that your IRA money will help your golden years after retirement, do not invest that money in Bitcoins. Try not to invest in Bitcoin if you have a decision to invest the money differently, like buying a house or helping your child seek admission to his desired school.

How does the Bitcoin IRA work?

The bitcoin IRA works along the same line as the regular IRAs. The only difference is that in Bitcoin IRA, you are investing your money in cryptocurrencies, as against mutual funds in IRA.

You have the choice to decide between Roth self-directed IRA and traditional IRA and squeeze benefits out of their tax advantages. You will have to altercate with similar contribution limits, $6000 or $7000 if your age happens to be 50 or older. If you own a small business enterprise or are self-employed in some other way, you can decide on Simple IRAs, SEP, and solo 401(k) s. The solo 401(k)s have a higher limit of contribution. There’s also an option to rollover funds from a regular IRA to a self-directed IRA.

While you will find some resemblance between self-directed IRA and Normal IRAs, few points strike a difference between the two. You might have to be more DIY when it comes to Bitcoin IRA. It is the opposite of the circumstance where you can assign an IRA and opt for buying and selling securities in one place. Such type of IRA refers to the one-stop shopping experiences that you will get out of brokerage firms.

You have to remember the following three components:

  • Custodian: A custodian is that person who gives refuge to your IRA. His responsibility is to keep your IRA secured and ensure that your accounts abide by the government and IRAs’ s rules and regulations. The banks and other financial institutions typically play such roles with your regular IRAs.
  • Exchange: An exchange looks into the management of your cryptocurrency trading. You can draw a resemblance between the crypto exchange with the standard stock exchange. Crypto exchange is also known as Digital Currency Exchange or DCE. It is the place where you buy and sell your bitcoin and other cryptocurrencies involved in trading.
  • Secure Storage solution: The secure storage solution dawns on the responsibility of protecting your cryptocurrency. Most of the miners who provide you with Bitcoin IRAs store your cryptocurrency by employing secure storage methods. It helps them keep your bitcoin secured from theft after you make the purchase.

Self-directed bitcoin IRA providers can provide you with all the above perquisites or some selective one. A Bitcoin IRA company can collaborate with any particular exchange or facilitate you in trading via some third-party crypto exchange.


Let’s glance at the advantages of Bitcoin IRA that will help you understand why you should invest in it:

1. Diversifying your portfolio

Cryptocurrency refers to an asset class that does not correlate with bonds and stocks. The Bitcoin IRA helps you diversify your portfolio, which allows you to hold your ground during difficult situations. Bitcoin will thus be a way out if one of your portfolios runs into a loss. Crypto has a volatile nature; nevertheless, it will protect your retirement portfolio and give you a stable life.

Moreover, exploring opportunities to swap crypto within your IRA to further diversify your holdings and potentially mitigate risk in your retirement portfolio is one of the best options for many investors. This strategic move enables you to adjust your asset allocation according to market conditions and risk tolerance, ensuring a more balanced and resilient investment strategy.

2. Expectation for higher Returns on Investment

Bitcoin can be highly volatile, but it can also give you exceptional returns on your investment. You can dream of gaining a lot through such cryptocurrencies. You can understand it better.

Bitcoin was valued at $5200 on March 15th, 2020, and ended up being around $30000. It can be a massive reason as you can expect exceptional results from Bitcoin IRA despite investing only a small percentage from your overall Bitcoin holding.

3. Advantages in terms of Tax

The biggest headache and impediment that the bitcoin investors suffer from is tracking the trades and bearing the burdens of taxation. You owe taxes to the exchange corporation every time you sell a cryptocurrency and make a profit. It can be troublesome as you need to pay close attention to the selling amount and the profit you are making.

When you invest in an account having a tax advantage, this burden falls off your shoulders. None of your assets are under taxation, except for the money and securities you hold in your account. It helps reap the benefits of a compound increase in the value of Bitcoin as the taxes are no longer existing.

However, there are a few limitations to Bitcoin IRA, just like any other portfolio:

1. Fees Levied: When you invest your Bitcoins in a self-directed IRA, a few fee amounts are attached to the investment. It is against regular IRAs, where you can invest for free. Make sure you remember all the expenditures you need to incur for investing your cryptocurrency for retirement. The expense will increase from setting up fees with trading fees for managing your account.

2. Limitations in Exchange: Some Bitcoin IRA companies prefer a few defined trade exchange platforms for trading. Some of these even allow trading without any such rules. You need to select a Bitcoin IRA company depending on the crypto exchange you want to go for.

3. Bitcoin Volatility: Bitcoin is highly volatile, where the prices can go as fast as they can crash to the ground. It can put your retirement investment amidst a cloud of uncertainty.

4. Capital losses: Normally, when you consider accounts under taxation, the losses can land a massive blow on your expectations. You can remove such losses from your accounts and work on gaining in the other portfolios. However, this facility is not available in a self-directed IRA, thus making your losses too permanent to recover.

Even though Bitcoin IRA has a few disadvantages due to its volatile nature, this is a great investment area. The rising trend of bitcoins over the years is an excellent opportunity for you to reconsider your retirement investments.