Pros and Cons of Investing in Bitcoin IRAs

Given its volatile price swings, Bitcoin might not be an ideal investment for retirement. Yet some fiscal services firms now offer the option of investing in the cryptocurrency through autonomous Individual Retirement Accounts ( IRAs ). Bitcoin IRA, one of the earliest providers in this quad, claims to have processed $ 400 million in client retirement investments in the digital currency distance as of March 2020 .

Below, we ‘ll look at some of the pros and cons of investing in a Bitcoin IRA. First, though, we ‘ll explore what a Bitcoin IRA is and how it differs from traditional retirement accounts .

Key Takeaways

  • A Bitcoin IRA is an IRA with Bitcoin or other cryptocurrencies in its portfolio.
  • To the IRS, bitcoins are considered and are taxed as property.
  • A few advantages of bitcoins are that they diversity portfolios, are expected to grow in popularity and availability, and may benefit investors with favorable tax treatment.
  • A few disadvantages include hefty fees, extreme volatility, and limited global use in business.

What Are Bitcoin IRAs ?

There is not a specific Internal Revenue Service ( IRS ) account designed for cryptocurrencies. frankincense, when investors refer to a “ Bitcoin IRA, ” they are basically referring to an IRA that includes Bitcoin or other digital currencies within its portfolio of holdings .

Since 2014, the IRS has considered Bitcoin and other cryptocurrencies in retirement accounts as property, mean coins are taxed in the lapp fashion as stocks and bonds. IRA holders looking to include digital tokens in their retirement accounts must enlist the aid of a custodian .

The return that many investors run into is that it can be unmanageable to find a custodian that accepts Bitcoin in an IRA. fortunately for those individuals committed to including Bitcoin in their IRAs, autonomous IRAs ( SDIRAs ) more frequently allow for alternate assets like cryptocurrencies .

recently, custodians and other companies designed to help investors include Bitcoin in their IRAs have become increasingly popular. Some of these companies include BitIRA, Equity Trust, and Bitcoin IRA, one of the early leaders in the field .

Advantages and Disadvantages of Bitcoin IRAs


Individuals may find that including Bitcoin or altcoin holdings may add diversification to retirement portfolios. This may help to protect those retirement accounts in the consequence of a major market downturn or other disruptive activeness in the future .

possibly more than diversification, investors inclined to add Bitcoin holdings to their IRAs likely believe that cryptocurrencies will continue to grow in popularity and approachability into the future. With their long-run expectation, IRAs are an excellent fomite for investments that hold major electric potential on the scale of decades. Of course, detractors of cryptocurrencies may argue that Bitcoin and other digital tokens remain unproved at best, or explosive and unstable at worst .

For those determined to invest in Bitcoin, it may be potential to avoid goodly capital gains taxes by including digital currencies in certain types of retirement accounts. however, there are other fees to consider arsenic well, as we ‘ll see below .


Bitcoin ‘s extreme excitability in holocene years makes it a bully sell as a retirement investing for many. The leading cryptocurrency routinely experiences meaning price fluctuations ; following a record price at the fourth dimension of over $ 16,000 per bitcoin in December 2017, the price plummeted. Its price, however, recovered over the following several years, reaching record highs in 2021. While Bitcoin ‘s price has risen over time, its price volatility could be unsuitable for person approach retirement who can not afford to ride out a downturn .

Worse, pessimists would likely argue that the ballyhoo surrounding Bitcoin and digital currencies as a revolutionary new form of currency has thus far proved to be dramatically overstate. A decade after it was first introduced, Bitcoin has not even supplanted any decree currentness, and it remains unmanageable for people in most parts of the world to conduct day by day business with any digital currency. In 2021, the nation of El Salvador passed a jurisprudence making Bitcoin legal affectionate alongside the U.S. dollar. Time will tell if greater borrowing follows in the terms of use of Bitcoin in exchange as money .

Another key disadvantage of including Bitcoin in an IRA is the fees. Bitcoin deal through an IRA is different from regular stock trade or from trade at cryptocurrency exchanges, which are not custodians. The potential tax benefits of trading Bitcoin through a autonomous IRA account come with their own set of challenges. The most important of these is the expense of add fees and hazard. Because firms offering autonomous IRA services are not bound by broke fiduciary duties, investors are on the hook if they do not assess risks associated with crypto markets .

Fees for Bitcoin trade take on diverse forms during the investment procedure, from initial frame-up fees to detention and trade fees to annual maintenance fees. For case, setting up a $ 50,000 autonomous IRA account for deal can cost ampere much as $ 6,000 in charges during an initial apparatus depending on the supplier. There are besides recurring detention and alimony fees charged by providers of such services .

ultimately, each cryptocurrency deal besides incurs its own set of fees from the service provider ’ south trade partner and custodian. A typical provider may charge 3.5 % per transaction for each purchase and 1 % or a flat fee for each sale. Further, there is the fact that previous withdrawal may besides result in individuals being taxed at the rate of capital gains. cumulatively, those fees could negate the tax advantages offered by IRA accounts .

especial Considerations

Bitcoin ’ randomness unique requirements, such as security and hands, have bumped up fees for services offered through IRA accounts. IRA custodians working with cryptocurrency must besides be prepared to take on extra report duties with the IRS, which may end up translating to higher fees for investors .

meanwhile, servicing providers are offering incentives for individuals to get into cryptocurrencies. Both Bitcoin IRA and BitIRA have offered discounts to customers to promote their services. even with discounts, however, the prognosis of entering a volatile space riddled with scams wholly at your own risk may not be an attractive one for most investors .

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