Last Updated on January 30, 2020
If you’re a retirement investor who has been watching the cryptocurrency market, you may know that Bitcoin is up over 150% in 2019. Suffice it to say, Bitcoin is doing very well in the cryptocurrency marketplace, but surprisingly, it is not the fastest growing cryptocurrency on the market.
One crypto is outperforming them all: Litecoin.
Litecoin the Fasting Growing Cryptocurrency
According to a recent article, Litecoin is up about 340% as of June 18, 2019. This is more than double the rise in Bitcoin. Currently, Litecoin has a market value of $8.3 billion. Although Bitcoin is still the largest and best-known cryptocurrency, with a current market value of $160 billion, Litecoin’s surge makes it the seventh largest digital asset, and not a cryptocurrency to overlook.
So what has Litecoin performing so well? Some investors believe the sudden spike may be due to companies such as Facebook launching their own cryptocurrency projects. Others believe Litecoin’s “halving” event, which reduces the number of coins Litecoin miners are awarded by 50%, is the cause.
Currently, the number that Litecoin miners mine per block is set at 25, but in the next Litecoin halving, it will be reduced to 12.5. According to the Litecoin Block Reward Halving Countdown, the next drop will be scheduled on August 5, 2019.
Why Litecoin Halving May Create a Price Increase
Litecoin halving has a few adverse effects for traders and miners. During this event, the market may become more volatile for traders, while miners will receive a smaller mining reward. But we are students of history, and know that with decrease of supply comes the increase of consumer demand. When the previous Litecoin halving event occurred on August 25, 2015, the price of digital currency shot up 60% before the event took place.
Litecoin’s surge is possibly a conglomerate of both Litecoin halving and the emergence of new cryptos, such as Facebook’s Libra.
Litecoin as an Investment
Litecoin was among the initial cryptocurrency to emerge on the heels of Bitcoin. While Bitcoin and Litecoin share many similarities, it is said that Litecoin has a faster block generation rate, ultimately offering a faster transaction confirmation. Litecoin claimed its popularity in the Fall of 2017 when Bitcoin skyrocketed, and has since been a popular crypto investment largely for the following reasons:
- It uses blockchain technology more efficiently than Bitcoin
- Litecoin mining is simpler than Bitcoin, which can cause a transition of Bitcoin Miners to Litecoin
IRS Treatment of Litecoin
Like all cryptocurrency, the IRS treats Litecoin similarly to stock. They are not considered currency, which makes it subject to either short-term (ordinary income tax rates) or long-term capital gains tax rates, if the asset is held greater than 12 months (15% or 20% tax rates based on income).
The IRS does allow investors to use their retirement funds to purchase cryptocurrency, such as Litecoin, however you must use a Self-Directed retirement account, preferably with a passive custodian. The reason for this is, banks and other financial institutions generally do not allow their clients to invest in alternative assets, like cryptocurrency. Therefore, if you were to establish a “Self-Directed IRA” with Vanguard, this institution will limit you to purchasing their products, which include stocks, bonds and other traditional assets.
By going through a passive custodian, such as IRA Financial Trust, you can establish a Self-Directed IRA or Solo 401(k), and will have the freedom to invest in Litecoin and other cryptocurrency at your choosing. By using a Self-Directed IRA LLC, you won’t even need custodian approval to make an investment – simply write a check, use a debit card, or wire the funds from the LLC bank account. It’s as easy as that. By using a Self-Directed retirement plan, you also gain the advantage of generating tax-deferred income and gains on your investments. In the case of a Self-Directed Roth IRA or 401(k), it’s completely tax-free.
The Future of Litecoin
Currently, Litecoin is the fastest growing cryptocurrency in a time where cryptos are making a strong comeback. Some experts believe that it will exceed its past record highs. However, it is important to note that cryptocurrency is extremely risky and volatile. If you are interested in using your retirement funds to invest in Litecoin, make sure to proceed with caution.
Self-Direct your retirement account to invest in Litecoin and other cryptocurrency today. Simply start by downloading the new IRA Financial App to establish your Self-Directed IRA or Solo 401(k) plan account. From there, you can perform basic maintenance, digitally sign documents, and get answers to important questions all in the palm of your hand. Contact IRA Financial directly at 800-472-0646 with any questions.