Bitcoin, the once vaguely known digital currency is now gaining mainstream adoption across the world. It has become the most widely used form of alternative currency at the moment. Bitcoin IRA, having recognized the future potential of the digital currency has created the first ever Bitcoin-based Individual Retirement Arrangement (IRA) in the United States.
Bitcoin is being increasingly adopted by big-name companies in the United States. Among the companies accepting Bitcoin payments in the country includes Microsoft, Dell, Overstock, Newegg, PayPal, Tesla and more. The creation of Bitcoin based IRA is influenced by the US Internal Revenue Service (IRS) ruling. IRS states that virtual currency like Bitcoin has an equivalent value in real currency and can be used to purchase goods and services.
The same government department, in its “Virtual Currency Guidance: Notice 2014-21” has declared that “Bitcoin can be digitally traded between users and can be purchased for, or exchanged into US dollars, Euros, and other real or virtual currencies.” This ruling has opened doors for the creation of retirement and 401(k) accounts that are funded by the digital currency.
Bitcoin IRA is an IRA fund that is recognized by the IRS. They have already opened accounts worth over $500,000 within months. Many people are interested in Bitcoin-based retirement funds because of the digital currency’s inherent advantages over conventional asset classes. By default, Bitcoin is disconnected from conventional asset classes, making it a speculative investment that doesn’t follow the dynamics of fiat ecosystem.
For example: In the case of a market crash, investments based on conventional asset classes are bound to take a hit. But Bitcoin, being an alternative asset class may remain unaffected. Also, by design, the maximum number of bitcoin to be ever mined stands at 21 million. The finite supply of Bitcoin makes it an appreciative asset whose value is bound to go up as demand increases. Anyone investing in Bitcoin now can expect huge returns in the coming years.
Currently, there are only two ways to invest in a Bitcoin-based IRA or 401(k). The first one involves an investment in GBTC – a Bitcoin ETF (exchange traded fund) where the investor isn’t in possession of actual Bitcoin but shares representing the digital currency. This method is usually expensive and subject to various costs and fees. The other option is through Bitcoin IRA where the investor buys actual Bitcoin over an exchange and transfers into an IRA approved special wallet. Bitcoin IRA will act as the custodian of the Bitcoin-funded IRAs as required by the IRS regulations for any asset/ “property” funded IRA.
Bitcoin IRA ensures that the investor is in possession of the actual bitcoins, which will be realized at the end of the term irrespective of its fiat equivalent value at that time.
The Bitcoin Investment Guide Book will help in better understanding of Bitcoin IRA and its benefits.
Ref: Bitcoin IRA | Investopedia | IRS | Yahoo Finance |