Investing in cryptocurrencies such as Bitcoin, Litecoin, Ethereum and others is possible with a self-directed IRA. Profits earned in a self-directed cryptocurrency IRA are paid directly to the IRA without any other taxable liability other than the one that applies when you retire. If cryptocurrency is an asset that interests you, the good news is that you can invest in “cryptocurrency” with your self-directed IRA (SDIRA). Whether you invest with your traditional IRA or Roth, your SDIRA allows you to combine a tax-advantaged strategy with a cryptocurrency investment strategy.
A self-directed cryptocurrency IRA is an investment account that contains cryptocurrency within the account. It's a retirement account that uses your IRA to buy cryptocurrency. Cryptocurrency is a digital form of tokens or “coins” that can be exchanged for goods and services. Many companies issue their own digital currency that can be traded specifically for their goods or services.
Blockchain is a highly secure technology that manages and records cryptographic transactions. There are many types of cryptocurrency available, in fact, more than 6,700. You can invest in cryptocurrency in a self-directed IRA. When you do, your earnings go directly to the tax-free IRA.
Cryptocurrency is considered an “off-grid” investment, making it difficult for governments to manipulate it like other currencies. Some investors buy Bitcoin to hold it in the same way and for the same reasons as gold or other precious metals, which are also permitted investments within a self-directed IRA. Given the nature of cryptocurrencies and their novelty in the market, regulations and oversight continue to change and are subject to scrutiny. While TradeStation and ErisX are much smaller cryptocurrency companies than better-known names like Coinbase, Kraken or Gemini, both TradeStation and ErisX have all the IRAs.
If you wanted to go and buy cryptocurrency with your personal money today, you would have to have a wallet to store the cryptocurrency. Over the past year, interest in cryptocurrencies has become much more popular, and the price of bitcoin, the highest by market value, reached an all-time high in April. While investments in digital currencies have the potential to be lucrative, cryptocurrencies are volatile. Investing in a digital currency fund can give you an indirect way to invest in cryptocurrency and avoid the need for a wallet or keys.
If you prefer to invest in cryptocurrency without owning cryptocurrency yourself, consider a digital currency fund. Cryptocurrencies are created using blockchain technology (Bitcoin was the first to be produced by the blockchain). To keep cryptocurrency in a retirement account, the account owner must make investments through an LLC (limited liability company). BITO can be bought and sold like a stock and eliminates the need for a crypto wallet and an account on a cryptocurrency exchange if you just want to be exposed to Bitcoin.
The funds in the IRA LLC commercial checking account have the sole purpose of investing in digital assets (or any other alternative asset allowed through self-direction).
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