With cryptocurrencies, especially Bitcoin, on the rise again, IRA Financial’s Adam Bergman discusses the best way to invest in cryptocurrencies with a Self-Directed IRA.
What Are Cryptocurrencies?
Cryptocurrencies, also known as Cryptos, are basically a digital or virtual currency. What makes them so unique and hard to counterfeit is the cryptography that’s used to create them. Further, “blockchains” make it easy to look up any transaction ever conducting with certain cryptos. A blockchain is a ledger that anyone can access that details the history of the “coin.” You can invest in cryptocurrencies by creating an account at an exchange, such as CoinBase.
The first and most popular type of cryptocurrency is Bitcoin. There are thousands of different cryptos, also called altcoins. The most popular of those include Etherium, Litecoin, ZCash and Dash. However, Bitcoin is the name everyone remembers when talking about cryptos. It rose to popularity as its price skyrocketed to nearly $20,000 in December of 2017. However, its bubble burst, and as recently as 3/27/19, was under $4,000. It’s roller coaster ride continues as it’s price rose to over $5100 in less than a week. As Bitcoin prices go, other cryptos generally follow
How To Invest in Cryptocurrencies
There are a few simple steps you need to take in order to invest in cryptocurrencies. First, you need a “wallet” that holds the cryptos. It’s not a traditional wallet that holds your other currency. Instead, it’s a digital wallet that has two keys, one public and one private. The public key is how you buy and sell cryptos, and what shows up in the blockchain. Think of this as your username. The private key is your password that allows you to buy and sell. Like any other password, it should be strong and known only by you.
Next, you’ll need to prove your identity with personal IDs, such as a driver’s license and social security card. The SEC requires this due to its Anti-Money Laundering Policy. Now, you need a way to fund your wallet. Generally, you can simply link it to a bank account or credit card. Paypal and other types of payment services may be accepted as well.
Lastly, you need to choose an exchange to buy and sell cryptos. Think of a crypto exchange as a stock market. Instead of trading stocks, you’re trading cryptos. We’ve already mentioned CoinBase, but there are several others to compare and contrast. Choose the best ones that fit your needs.
Using a Self-Directed IRA for Cryptocurrencies
Self-Directed IRAs (SDIRA) allow you to invest in all sorts of alternative assets, including cryptocurrencies. The best part of using a Self-Directed IRA to invest in cryptocurrencies, is that all taxes are deferred until retirement. In the case of a Roth IRA, withdrawals are tax-free.
Setting up a Self-Directed IRA can be done in a matter of a couple of days. A Self-Directed IRA is created by IRA Financial Group. You fund the IRA, either via rollover, transfer, or direct contribution. An LLC is formed and becomes “owned” by the IRA. A bank account is linked to the LLC and with IRA Finacial’s “checkbook control” structure, you have complete control of your IRA Funds.
You can now buy and sell cryptos, such as Bitcoin, anytime of the day or night. This is important, because unlike stock markets, Crypto Markets never close. Since you have control of your funds, you don’t need permission from a custodian to make an investment. Moreover, IRA Financial offers a “Hard-Wallet” SDIRA that allows you to connect your private key to the account so that you can directly use your IRA funds at an exchange
Get in Touch
If you want more info about using a Self-Directed IRA to invest in cryptocurrencies, contact IRA Financial Group at 800-472-0646. You can also fill out the form above or on our contact page. We look forward to hearing from you!