BitIRA | The Essential Guide to Digital IRAs
8 Reasons to Convert Your Retirement
to Digital Currencies Right Now
Digital currencies were purpose-built to circumvent the inherent problems with our existing financial system. And so far, they’ve been impressively successful. That’s exactly why they’ve increased in value so quickly, and why many experts like CNBC’s Jim Cramer expect that they will continue to do so in the future.
But most importantly, the IRS has now officially classified digital currencies as personal property, allowing them to legally be held as a retirement asset inside a Self-Directed IRA.
Most retirement accounts can quickly and easily be converted to a Self-Directed IRA with zero penalties. We explain the process step-by-step here.
But first, let’s examine 8 foundational reasons for the swift, steady growth of digital currencies, and why anyone with a retirement account should consider taking advantage of them…
Decentralized Creation & Storage
Impossible for Central Banks to Debase
Fiat currencies (paper money) are controlled directly by governments and central banks. As such, they can easily be manipulated and debased by invasive monetary policy, whether we call it “quantitative easing,” “printing money” or interest rate manipulation.
But digital currencies are untouchable to centralized institutions. Governments and central banks have zero ability to manipulate the value of any digital currency. Therefore, the value of digital currencies cannot be debased by any government or central bank.
Limited Supply & Adaptive Scaling
Protecting Against Inflation
By design, many digital currencies are limited in supply, making them resistant to the inflationary pressures of government currencies.
For example, because of the mathematics and software behind the bitcoin network, there’s a hard cap of 21 million bitcoin that can ever exist. On top of that, the network automatically makes it increasingly difficult for new bitcoin to be mined as the currency supply grows. This feature is called “adaptive scaling,” and it effectively guards against debasement and inflation.
Fiat “paper money” currencies like the dollar are the opposite. Central banks can create as much new money as they want, anytime they please. When that happens, uninflatable assets like bitcoin and gold tend to increase in value (partially from increased demand, and partially because the “measuring stick” of value, the dollar, has shrunk).
Peer-to-Peer Protocol
Fast & Secure Without Third-Party Interference
All digital currency transactions are mediated and confirmed through a peer-to-peer protocol of their own blockchain network, making them exceptionally fast and secure. The currencies themselves are stored privately in encrypted software “wallets.”
No third-party institutions like banks, governments, or regulatory agencies can intrude on the activity of digital currency networks.
Multi-signature verification, which requires your transactions to be confirmed through the network and a private verification company, can add yet another layer of security. This feature is standard and complimentary for all of BitIRA’s customers.
Cryptographic Storage
Private and Anonymous
Although every digital currency transaction is verified and stored permanently on the blockchain, the personal ownership information behind the individuals who make those transactions is concealed through heavy encryption.
This makes digital currencies the most private and discreet store of wealth ever created. You alone decide who is aware of your digital currency investments.
Furthermore, the digital nature of cryptocurrencies means they’re totally portable. This is one feature that sets digital currencies apart from other inflation-haven investments, like commodities.
A New Asset for Hedging Risk
Shelter from Overvalued Stocks
We’re currently living in what is arguably the longest bull market in U.S. history , and stock prices today are dangerously inflated. A price correction is inevitable, and new buyers are increasingly turning to digital currencies as a hedge. These “new buyers” include more than a few familiar names: Tesla, Goldman Sachs, BNY Mellon, JPMorgan Chase and other big names in finance have recently jumped on the cryptocurrency bandwagon.
This makes digital currencies the most private and discreet store of wealth ever created. You alone decide who is aware of your digital currency investments.
Furthermore, the digital nature of cryptocurrencies means they’re totally portable. This is one feature that sets digital currencies apart from other inflation-haven investments, like commodities.
In addition, some individuals you may have heard of own cryptocurrencies: Jim Cramer, Suze Orman, Elon Musk, Mark Cuban, Richard Branson and Bill Gates have all spoken about their holdings of digital currencies.
Although academic research is still ongoing, digital currency pricing doesn’t seem to be correlated with stock pricing. This may offer owners of cryptocurrencies an advantage when stocks slide.
“I have invested in bitcoin because I believe in its potential, the capacity it has to transform global payments is very exciting.”
– Sir Richard Branson, Founder of Virgin Group
IRS Ruling
Tax-Deferred Status in Self-Directed IRAs
Like we said earlier, digital currencies are treated as personal property inside your Self-Directed IRA. As a result, they receive a special tax-deferred designation. That means they can perpetually increase in value without immediate tax liability.
On top of that, any proceeds you accumulate from buying and selling digital currency within your account can be retained tax-free until you take a distribution.
“With their new insurance policies now extended to cryptocurrencies in storage, BitIRA is seemingly ahead of its competitors in this space as of right now.”
– Merkle
Balance Your Existing Retirement Assets
Portfolio Diversification
Your retirement savings should maintain exposure to a wide variety of asset classes. The balance between those asset classes may change over time, depending on your age and risk tolerance. But never would you forgo a potentially profitable asset class entirely.
That said, as digital currencies continue gaining traction, they’re proving themselves as a worthy diversification tool for every retirement account — just like stocks, bonds, and other investment instruments.
Here’s what the SEC has to say on this topic:
The Magic of Diversification. The practice of spreading money among different investments to reduce risk is known as diversification. By picking the right group of investments, you may be able to limit your losses and reduce the fluctuations of investment returns without sacrificing too much potential gain.
The Beginning of a Major Disruption
Long-Term Growth Potential
Digital currencies are just now emerging from their infancy, and they could likely be the start of a major disruption in the financial system.
Consider the speed and freedom digital currencies allow for cross-border transactions. Their user base is exploding in countries with strict monetary controls for this very reason.
And as fiat “paper money” continues to be debased by central banks, the global demand for a store of wealth that cannot be manipulated will grow stronger and stronger. Digital currencies are ideally positioned as the first and best alternative.
Plus, blockchain technology and ethereum are already finding use cases in dozens of industrial applications. With adoption continuing to spread in the realm of private enterprise, expert investor Raoul Pal (who predicted the 2008 crash) says:
“Gold can go up 3x or 5x in the next three to five years. Bitcoin, well, that’s a different story. I think [bitcoin] can get to $1 million in the same time period.”
Remember the internet in 1995? The space was new and volatile. Most people scoffed at it.
But a small, fervent group of savvy investors insisted it would be revolutionary. And they were handsomely rewarded for their foresight and open-mindedness.
That said, as digital currencies continue gaining traction, they’re proving themselves as a worthy diversification tool for every retirement account — just like stocks, bonds, and other investment instruments.
“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, Founder of McAfee
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DISCLAIMER: The decision to purchase or sell virtual currencies (also known as “digital currencies” or “cryptocurrencies”), and which cryptocurrencies to purchase or sell, is ultimately your decision alone. Purchase and/or sale decisions are highly individual and must be a function of each customer’s individual financial situation, goals, and risk tolerance. BitIRA is not a financial planner, investment advisor or retirement specialist. BitIRA is not responsible for your decision to purchase or sell digital currencies, or the timing or results of any such act (or failure to act). Any and all assistance BitIRA may offer or provide does not create a fiduciary relationship between you and BitIRA. Any and all purchases and sales are made subject to your own research, prudence, and judgment. BitIRA does not provide tax, investment, financial planning, retirement-specific, or legal advisory services and no one associated with BitIRA is authorized to render any such advice or service. BitIRA is not responsible for any consequences of you purchasing cryptocurrencies for IRAs, trusts or other persons or entities, or for any changes in the laws relating to such purchases or sales. Any written or oral statements by BitIRA, its principals, agents, or representatives, relating to future events constitute opinions only, and are not representations of fact.