The meteoric rise of Bitcoin in the last 12 months was something which caught many investors by surprise. Owing to that spike in investment for not just Bitcoin but other cryptocurrencies too, many people are now looking to get involved in investing in this new and exciting financial development. In order to do this, thousands are turning to their IRA with the idea of using their accounts to fund cryptocurrency investments. There are however, many and requirements which you must adhere to, as well as many important things which you must watch out for if you plan on utilizing your IRA to invest in the crypto market. To help you better understand what is required from you, here are the top rules and watch outs which you need to be aware of.
It can be easy to get confused with some of the syntax which is used when discussing Bitcoin or cryptocurrency IRAs. For example, virtual currencies are considered by the U.S. as property for federal tax reasons. The IRS does not specifically mention Bitcoin IRAs under its 2014 ruling on virtual currencies, but this is because it intentionally doesn’t mention every investment type available. The key point here is that Bitcoin is eligible for inclusion in IRA investments, as long as such investments are done in a way that complies with IRS regulations.
Not All Bitcoin Wallets Are Made Equal
A Bitcoin wallet is required to store your currency but it is important that you don’t make the mistake in thinking that they all offer the same thing. For example there are some wallets which allow you to store multiple cryptocurrencies, whereas others only support Bitcoin. There are lots of other pros and cons which you need to be aware of when weighing up which digital wallet you will use, so make sure that you check them all out before you decide which one to use.
Price Isn’t Everything
The DIY model when setting up your Bitcoin IRA is not always recommended and unless you know exactly what you are doing, it is always better to use a service for this. There are many companies which can offer you a full service of turning your IRA into a Bitcoin IRA, all with varying benefits and various prices. The key however is not to assume that the cheaper option is the best option, in many cases they are not cheaper in the long term. Some companies will offer the chance to sell Bitcoin at cheaper prices than the market value but there are usually strings attached to these deals such as purchasing of mining equipment or lengthy fulfillment terms. There are higher fees attached to place Bitcoin in an IRA over the likes of securities and traditional assets, so this needs to be taken into account too. Again, make sure that you shop around and weigh up the terms and conditions before you decide on who to use.