Best Crypto IRA for 2021 – Bitcoin IRA vs. Ethereum IRA, Which is Better. If you’ve been living under a rock the past few years, you probably know of the amazing financial opportunities in cryptocurrency.
Some types of crypto coins, once only worth a few hundred dollars, are now worth thousands. The two most powerful crypto coins, Bitcoin and Ethereum, have experienced incredible gains and are now playing major roles in international wealth and finance.
Due to a bull run, Ethereum and Bitcoin have both risen to their highs and are now at the center for many discussions about wealth and investment.
Bitcoin’s current price is around $60,000, while one Ethereum coin hovers around $4,000. It is interesting to see that powerful groups in finance and government are beginning to use these coins as their main source of wealth. There are many coins people can invest in each day, but these two could be the ones that really revolutionize finance.
There is so much trust in Bitcoin and Ethereum, that they are now investable assets in personal IRAs. What are the basics of investing in ETH or Bitcoin in an IRA account? This is the place to learn. Let’s take a look at everything you need to know about a cryptocurrency IRA. Viva Capital can help you if you are interested in investing in a cryptocurrency IRA.
What is an IRA?
Before we get into investing in ETH or BTC in an IRA, we thought it would be a smart idea to just quickly go over what an IRA account is. Individual Retirement Account, is an investment account that allows individuals to save for retirement with tax-free growth or on a tax-deferred basis. The three most common types of IRAs are:
- Traditional IRA
- Roth IRA
- Rollover IRA
All three options come with different purposes, rules, and goals, but all three offer people a way to invest in companies and – now – cryptocurrencies without having to accrue realized gains taxes. The crucial thing to know about IRAs is that you will not be able to take out the money until you reach the age of 59 and a half years of age. If you absolutely need that money now, you can withdraw money from your IRA but you will face some pretty hefty tax fines.
Okay. So now that you know the very basics regarding IRAs (and trust us there is a whole lot more than you will want to know before you open an IRA of your own), let’s get into the basic details of investing in BTC and ETH in your IRA.
Cryptocurrency IRA
Overall, the most common coins that individuals invest in as part of an IRA are Bitcoin, Ethereum, and Litecoin. Here are the key things to know about investing in Bitcoin in an IRA:
First off, it is important to know that in the eyes of the IRS, Bitcoin is considered and taxed as property. In the past, lots of people got in trouble by not reporting their Bitcoin in their taxes and were hit with heavy fines. Of course, you already have an IRA, chances are good that you are savvy enough with investing and taxes to know that, but we thought it would be important to mention anyway.
Overall, Bitcoin is seen as the primary store of wealth in the crypto space. People often consider it to be gold and its role in the more traditional financial system for this reason. While Bitcoin may not have much utility, its market cap is enormous and at this point, it really is seen as an asset that is too big to fail. As mentioned, BTC is trading at around $60K per coin, some estimates see it is worth as much as a quarter of a million dollars in the relatively near future.
Bitcoin IRA pros:
- Investing in BTC offers a lot of diversity to your IRA investments. In fact, crypto sometimes performs best when traditional markets are down, meaning it can be a great option to offset losses in that sector.
- It is expected to grow in value and diversity going forward.
- It may benefit investors with favorable tax treatment.
Bitcoin IRA cons:
- There are heavy fees involved with investing in Bitcoin and the more valuable coins become the more energy it takes to invest, meaning those fees increase.
- The asset itself is incredibly volatile compared to similarly priced goods. It can be seen as high risk and high reward.
- As previously mentioned, there is still limited global use and is still primarily seen as a store of wealth.
When it comes to investing in Ethereum in your IRA, much of the overall approach to it is similar to that of Bitcoin. One of the primary differences here is that while Bitcoin is seen as the primary store of wealth, Ethereum is seen as the primary building block of the blockchain. It is heavily used to create projects on the blockchain and there are countless “altcoins” that are built on the ETH blockchain.
Ethereum IRA pros:
- Just like BTC IRA, ETH IRAs offer a ton of healthy diversity to your portfolio.
- Unlike BTC, ETH is still relatively affordable, and many predict that it will reach prices close to $10K shortly.
- It is the key building block on the blockchain and countless companies and institutions will likely depend on it in the future.
Ethereum IRA cons:
- There is a lot of volatility in Ethereum, and its value can vary widely from day to day and even from hour to hour.
- The fees are immense and the prices go up when Ethereum is in heavier use across the market.
- Many competitors are actively trying to “flip” ETH in terms of becoming the second most valuable coin on the market.
