In the world of investments Bitcoin, a form of cryptocurrency, is receiving more and more interest from investors as a potential retirement asset. Particularly now that you can invest in a Bitcoin IRA. Whenever there are opportunities for investment, the first question that usually arises is whether it can be added to one’s individual retirement account or IRA.
Currently, investing in a Bitcoin IRA is not a very common occurrence. However, neither was investing in a Gold IRA, but that changed. Furthermore, a few years ago it wasn’t that common for retailers to accept Bitcoin as a form of payment for goods and services, but that changed as well. So the ability to include them in your IRA is an interesting and exciting development.
What are Bitcoins?
If you intend on investing in Bitcoins it’s important to know what they and cryptocurrencies are. In short, Bitcoins are a digital currency which are created and held electronically. There is no central bank in control of Bitcoins and they are not printed like paper money. People and businesses create them through computer systems around the world that utilize a special type of software for solving mathematical problems. Admittedly the concept takes a bit of getting used to.
Where it All Began
Satoshi Nakamoto developed the first Bitcoin. Based fully upon mathematical proof, he created a payment system. His desire was to create a fully independent currency that was not under any type of authority. This would enable the currency to be transferred instantly between accounts with no or very low transaction fees.
Being digital the currency is not printed meaning that it is also unaccountable to general people. It essentially makes its own rules. This differs from central banks which can decide to print more money to pay off the national debt, thus devaluing their own paper currency.
Bitcoins are completely digital and created by a community of people that anyone can join. The official term for this is “mining.” This means that within a type of distributed network the power of computers is used to create and find bitcoins. Through this same network transactions are made using this digital currency. Therefore, bitcoin is both a payment network and a currency.
Bitcoin’s Unique Features
There exist numerous features of bitcoins that differentiate them from other currencies that are owned by banks and backed by governments. Here are several examples.
- Bitcoins are decentralized.
- Bitcoin accounts are very easy to set up.
- Bitcoins are 100% anonymous.
- Its system is fully transparent.
- Transaction fees are extremely small.
- Transactions are very fast.
- Once you send a bitcoin you cannot get it back unless the receiver returns it.
Regarding IRAs there is something referred to as “permitted assets.” However, the rules are not very well defined with it comes to bitcoins. The reason is that no one has settled on what type of asset is a bitcoin. The one thing financial experts can agree on is the bitcoin is a standalone asset. With that being said, any asset can be included in an IRA except for the following:
- Metals, with the exception of certain types of bullion
- Coins, with the exception of certain types of bullion.
- Alcoholic drinks
- Various forms of tangible property
According to this list it appears that bitcoins are acceptable since they do not fall under of any of these prohibited categories. However, the IRS has not made an official ruling on whether bitcoins are an accepted asset for an IRA. Then again, they haven’t said “no.”
The current trend appears to be toward accepting them into retirement plans and IRAs. If you wish to add bitcoins to your retirement portfolio you will need to do a little research to find a trusted IRA custodian.
Finding a Bitcoin IRA Custodian
I you own bitcoins and want them included in a bitcoin IRA you will need to find a custodian willing to accept this type of currency. This easier said than done as there are a limited number custodians willing to accept bitcoins. If you do find a willing custodian, particularly the larger ones, you will generally find it very difficult to work with them. There is another concern, will custodians stay with bitcoins for the long-term. Fidelity investments, the largest IRA custodian in the world, once accepted bitcoins for a short period of time. Then a few months they ceased accepting them.
Well, all is not lost as there are a number of custodians willing to accept bitcoin. They are:
- The PENSCO Trust Company
- The Millennium Trust Company
- The Entrust Group
- Regal Assets
Our recommendation is the #1 rated gold IRA company – Regal Assets. Many of the reasons we cited Regal Assets as our Top Gold IRA Company are the same reasons for choosing it as our Top Bitcoin IRA Company. Further reasons for choosing Regal Assets over the other three include the fact that The PENSCO Trust Company is a relative unknown. You need a proven company.
While the Millennium Trust Company and The Entrust Group both accept bitcoins into their IRAs it seems a little vague on their websites. This makes it appear that while they accept them, they might not be that enthused. When a company is not enthused about a product it will generally be reflected in poor customer service.
The reason there are not a large number of custodians willing to accept bitcoin is because they’re still wary of it. They consider to speculative and have difficulty understanding it as an asset. There is also the concern over the potential of regulatory changes which might make them complicated to work with.
For years, Regal Assets has led the precious metals IRA industry and just recently started accepting bitcoins in their IRA. Similar to how they approach Gold IRAs, they are leading the way by ensuring that people can utilize the asset.
The reputation of the company is stellar. They have an A+ rating form the Better Business Bureau, an AAA rating from the Business Consumer Alliance and a 5 Star rating from over 1,000 customer reviews at TrustLink.
Regal Assets has created a Free Bitcoin IRA Guide to help you better understand how bitcoin works and the benefits of having a bitcoin IRA. They cite a number of reasons why bitcoins are referred to as “The New Gold” and why it should be included into an IRA. Here are few of the reasons:
- It is a decentralized form of currency.
- There is a limited supply of 21 million bitcoins.
- There are an increasing number of people transacting in bitcoins.
- It is not linked to gold and it is a hedge against inflation.
- The IRS has approved it as a form of currency.
- It is likely that bitcoins are currently undervalued.
What the Experts are Saying
“Bitcoin is a techno tour de force.” – Bill Gates, Founder of Microsoft
“You can’t stop things like Bitcoin. It will be everywhere and the world will have to readjust. World governments will have to readjust.” – John McAfee, Founded McAfee Associates
“Bitcoin is a remarkable cryptographic achievement and the ability to create something that is not duplicable in the digital world has enormous value.” – Eric Schmidt, CEO of Google
“The Federal Reserve simply does not have authority to supervise or regulate bitcoin in any way.” – Janet Hellen, Chair of the Federal Reserve
“I do think Bitcoin is the first encrypted money that has the potential to do something like change the world.” – Peter Thiel, Co-Founder of PayPal
Are Bitcoin IRAs a Good Idea?
We’ve provided you with a good amount of information on bitcoins and bitcoin IRAs along with supportive quotes from a number of well-known individuals. We’ve also demonstrated that with a little effort you can find a company that will allow you to put bitcoins into a retirement fund. However, just because you’ve become a little more knowledgeable about bitcoins, have the support of industry leaders and a willing company that will accept bitcoins, the question remains, is it a good investment?
Let’s look at a little history. If you invested $200 into bitcoins in 2011, your investment would now be worth over $500,000. By the results, we could declare that a good investment.
As such, anyone who believes that the use and importance of bitcoin will continue to grow in the future should consider them to be a solid investment. But like gold, you want to use bitcoins to diversify your portfolio, not consume it. As with all investments, an investor must be realistic about the fact that there is an element of risk in addition to the potential of rewards.
Only you can decide if a bitcoin IRA is a good investment for your particular set of financial circumstances. Furthermore, only you can decide whether or not the acceptance of bitcoins will continue to grow over the years and if it will become fully accepted.
If you do decide to invest in a bitcoin IRA do your research and seek the advice of a financial professional. He or she can answer your remaining questions.
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