Bitcoin has come a long way from its humble beginnings when it was first proposed in 2008 by Satoshi Nakamoto and its eventual creation on the 3rd of January 2009. So much so that it is being compared to precious metals such as gold and silver. Hence, it sometimes falls under precious metals IRA.
Like every other precious metal IRA, bitcoin metals resource needs to be held by an IRA custodian known as Bitcoin IRA companies. They play a vital role in ensuring that your Bitcoin individual retirement account investment is in accordance with the IRS requirements.
To ensure that you have a full understanding of the role of these companies, we have written this article to present you with all you need to know about Bitcoin IRA companies.
What a Bitcoin IRA Company is
A Bitcoin IRA is somewhat like Roth IRAs. When you invest with these companies, you are allowed to invest in digital currencies such as Bitcoin for retirement purposes instead of bonds and stocks.
A reliable custodian is SEC-registered and must meet the IRS requirements to operate in this form. Without this, you cannot invest your cryptocurrency with such a company.
Why do you need a Bitcoin IRA Company?
Generally, all forms of IRAs require the involvement of a custodian to hold and aid you with transactions. This is a requirement by the IRS for holding this kind of account. Hence, since you cannot keep your cryptocurrency yourself, you will have to hire a custodian to do so for you.
This method of investment is a great option to get a profitable return on investment while reducing the risk involved in regular cryptocurrency trading. Furthermore, since the IRS thinks of your Bitcoin as property, there are no tax consequences for these investments. This is because the design of these accounts protects your assets from such tax implications while ensuring that you enjoy your retirement benefits.
How Bitcoin IRA Companies are Different from Regular IRA Companies
Regular IRA focuses on the purchase of stocks, mutual funds, bonds, exchange-traded funds, and other forms of assets investment. On the other hand, this individual retirement account deals with storing your savings for retirement as cryptocurrency such as Bitcoin. Visit https://www.bbc.co.uk/newsround/25622442 if you still don’t know how these cryptocurrencies work.
Although several benefits are attached to this type of retirement investment such as low fees, high returns, etc. Nevertheless, it is still regarded as a risky venture because it is still a relatively new asset that doesn’t provide a lot of safety nets or guarantees for investors.
While support for these digital currencies is being received from certain traditional brokerages, it is not yet widespread with the majority of the mainstream brokerages. Despite this, with the current trend and projection of these digital currencies, it is only a matter of time before it receives widespread acceptance.
To get an account in this investment option, you don’t need to be at a certain age to do so as there is no age requirement whatsoever. Also, you can decide the distribution direction of your investments because it is a self-directing account.
Advantages of Having this Investment Account
Below are the advantages of having a cryptocurrency individual retirement account:
1. High Returns Potential
Despite the risky and volatile nature of the digital currency market, it has a very high return potential. The value of Bitcoin for example has risen astronomically over the years that individuals who made early investments are already getting their returns in ways they didn’t even imagine were possible.
2. Guarded against Inflation
Fiat currency is always susceptible to inflation. However, that is not the case with digital currencies. They are guarded against inflation which means you don’t have to worry about your investment value depreciating due to the price increase of goods and services.
3. Tax Benefits
If you choose to open Bitcoin IRA, the commodity’s growth is regarded as tax-deferred provided it remains in this form of investment. You even enjoy tax-free growth if you invested in a ROTH cryptocurrency individual retirement account. Click here to learn more about a ROTH individual retirement account.
4. Banks are Cut Out
When you open this account, you don’t have to deal with banks. Hence, your investment cannot be touched or affected by bank charges and whatnots due to their decentralization and independence from banks. Although these IRA custodians have nothing to do with federal regulation; however, they still required approval from the IRS to operate.
Custodians always offer insurance and security for accounts that are set up with them. To ensure top-notch security, all transactions on your account are protected using several security features. It is then further confirmed on a blockchain network using a peer-to-peer protocol.
Disadvantages of Having this Investment Account
Below are the disadvantages of having a cryptocurrency individual retirement account:
1. Hack Risks
Compared to fiat currencies, it is far easier to steal your digital currencies through hacking. Therefore, it is advised that you make use of a very secure device for your transactions.
The volatility of the prices of these cryptocurrencies is something to be wary of as they could rise and fall suddenly.
3. Exchange Limitations
There are some exchange limitations on cryptocurrency trading. Some custodians permit trading on their affiliated currency exchanges alone while others may allow you to choose your exchange platform.
Learning all the ins and outs of the process can be very challenging. Hence, getting a trusted and reliable Bitcoin IRA company becomes essential as they will help you get the best deal.
In the article above, we have discussed the basic information you need to know about Bitcoin IRA companies.