It’s not often that a new asset class is born right under your nose. But unless you’ve been hiding under a rock for the past several years, you will have noticed that cryptocurrencies like Bitcoin have taken the world by storm. These new asset classes, for investment purposes, are taxed like many other assets—almost like a stock that you were to purchase. This is good news for retirement investors, because it means these assets fit neatly into a retirement account when you use a Self-Directed IRA. But how does Self-Directed IRA Cryptocurrency investing work, and what does it look like? Here’s what you’ll want to know.
What You Need to Know About Self-Directed IRA Cryptocurrency
When investing retirement assets in a cryptocurrency, you’re engaging an asset class. Remember: there is not any single cryptocurrency, just as there is not any single piece of real estate. Real estate is an asset class, as are precious metals, as are cryptocurrencies.
When we wrote an article on the state of cryptocurrencies in 2019, a cryptocurrency like Bitcoin was trading at just a few thousand dollars. These days, it is off its highs, but it has still generated astonishing returns for those investors fortunate enough to have gotten in early. But while this is no promise of future gains—any legitimate investing asset class has risk of downside—it does show the stunning potential of diversification within a retirement portfolio. Because a Self-Directed IRA allows investors to invest in a wide range of potential asset classes in a retirement account, it means that you can construct a portfolio of your choosing and your own design.
What You Need to Know About Cryptocurrency
What is cryptocurrency, exactly? Cryptocurrency is digital currency, or digital assets, that is secured through cryptographic means—making it difficult or even impossible to counterfeit. Blockchain technology establishes an independent ledger for monitoring cryptocurrency transactions, requiring no bank. As such, cryptocurrencies are often touted by those who believe in independent financial systems. However, you’re under no obligation to do so. You may simply believe in the asset, or you may not. With a Self-Directed IRA, it’s up to you.
Cryptocurrencies like Bitcoin and Ethereum have benefited from widespread adoption—it’s very common to bid on NFTs, or non-fungible tokens, through the use of ETH, or Ethereum. Because of this, many people place a lot of value in these cryptocurrencies. But like gold and silver, they’re not the only games in town. However, one characteristic that differentiates precious metals from cryptocurrencies is that there are hundreds and thousands of cryptocurrencies on the market. This means that an investor has to have a discerning eye. Many cryptocurrencies are in their boom-or-bust stage, making them risky—but potentially profitable—investments.
Using Cryptocurrency Within a Self-Directed IRA.
Yes, it’s possible to hold cryptocurrency assets within a retirement account. Once you do, you’ll be able to construct a retirement portfolio that has been diversified according to your needs and wants. This is the beauty of a Self-Directed IRA; with it, you can call the shots, building an investment portfolio that’s all about your expertise, your experience, and your goals. Once you establish yourself with a proper Self-Directed IRA administration firm, you’ll be able to invest in a wide range of potential assets that might not be available to the average investor. It’s easy to set up, easy to maintain, and when you work with American IRA, you’ll see that the fees are also flat-rate and low. This helps you maximize the return you get from whatever it is you put in your retirement portfolio.