What is Bitcoin IRA
Innovative and increasingly popular, a Bitcoin IRA is an alternative version of the traditional IRA that includes the cryptocurrency Bitcoin among its investments. With a traditional IRA, the investments are chosen exclusively by the financial institution that set up the plan. These portfolios are almost always comprised of stocks and bonds. Because of demand from investors seeking higher returns from their retirement plans, many banks and financial institutions have begun offering the option of a Bitcoin IRA.
Buying and Selling Digital Currency
For those who are just beginning to discover and learn about cryptocurrency, Bitcoin is a form of digital money that exists virtually, rather than in the form of coins or paper bills. Transactions made using Bitcoin are recorded using technology known as blockchain, which maintains an open ledger to provide transparency to all users. Every purchase and sale of Bitcoin can easily be verified, tracing all the way back to the very first transaction. Records in a blockchain are permanent and altering them is unfeasible. It has become difficult to refute the infallibility of blockchain technology and this level of transparency and trust has never been seen before in the financial world.
Cryptocurrency as an Investment
Many investment experts acknowledge the legal status of Bitcoin and other cryptocurrencies is mostly unregulated in most countries. Some countries have officially legalized Bitcoin for all types of business transactions, while other countries have banned the virtual money outright. The investment industry was one of the first to observe the rising popularity of Bitcoin and the disruptive potential it presented to traditional systems of investing. As early as 2013, the U.S. Securities and Exchange Commission, commonly known as the SEC, began to issue warnings regarding the potential risks of investments involving virtual currency. Over time, many of these warnings have proven to be misguided. As the banking industry has embraces cryptocurrencies like Bitcoin more readily, the SEC is beginning to warm up to them as well.
The Benefits of a Bitcoin IRA
To establish a Bitcoin IRA, you need to set up a self-directed individual retirement account, commonly abbreviated as SDIRA, which lets you purchase any legal type of asset. While traditional IRAs primarily focus on public stocks and government bonds, alternative SDIRA investments might include real estate, Precious Metals and cryptocurrencies like Bitcoin. While conventional investments like bonds offer little risk, they also provide only small returns. The value of Bitcoin, however, has skyrocketed. As acceptance of digital currency increases, so does its worth. A single Bitcoin, once valued at only a few cents, is now worth thousands of dollars. No other class of assets has shown to yield the high level of return seen with Bitcoin in recent years. As a portion of a more extensive portfolio, Bitcoin can be a great way to hedge against inflation.