Crypto Currency IRA-Bitcoin

[pareshhb]

Hello All:
I am recently "retired" and am considering purchasing Bitcoins in my Roth IRA. My research shows that I would have to work with a specialized company that would create a self directed IRA (it will be some form of a LLC) that would then hold the crypto currencies. I also understand that this is how precious metals are held in IRAs.

Anyone have experience with this or can provide some guidance and recommendations?

 

[jim584672]

I think the GLD ETF is ok for IRAs. Don't know about crypto.

 

[OldShooter]

... recommendations?

Forget the cryptos.

William Bernstein on investing for retirement: “Make no mistake about it: The object of this particular game is not to get rich – It’s to not get poor.”

 

[cathy63]

I thought I saw recently that you could now hold crypto ETFs in an IRA without doing any special gymnastics to make it happen. Maybe that would work for you and let you get started faster.

Google says you could look into Grayscale:

Grayscale Bitcoin Trust (symbol: GBTC),
Grayscale Bitcoin Cash Trust (symbol: BCHG),
Grayscale Ethereum Trust (symbol: ETHE),
Grayscale Ethereum Classic Trust (symbol: ETCG),
Grayscale Litecoin Trust (symbol: LTCN)​

If you didn't want to hold actual currency, you could look at Blockchain ETFs, which should have a lot of overlap with regular tech sector funds:

Reality Shares Nasdaq NexGen Economy ETF (BLCN)
Amplify Transformational Data Sharing ETF (BLOK)
First Trust Indxx Innovative Transaction & Process ETF (LEGR)​

 

[OldShooter]

... Blockchain ...

A blockchain is a kind of database design, used to implement cryptos. It's like a car that the cryptos ride in. Other things can ride in the car as well. I have read that it has been looked at for land titles and business contracts. Its patentability appears to be dubious. (https://www.americanbar.org/groups/...lity-blockchain-technology-future-innovation/) Without intellectual property protection, IMO it is probably dubious as a focus for an investment fund as well.

Really, this stuff is for speculators not investors.

 

[cathy63]

A blockchain is a kind of database design, used to implement cryptos. It's like a car that the cryptos ride in. Other things can ride in the car as well. I have read that it has been looked at for land titles and business contracts. Its patentability appears to be dubious. (https://www.americanbar.org/groups/...lity-blockchain-technology-future-innovation/) Without intellectual property protection, IMO it is probably dubious as a focus for an investment fund as well.

Really, this stuff is for speculators not investors.

If you look at the holdings for Blockchain ETFs, you'll see names like Amazon, Microsoft, IBM, Google, Facebook, SAP, Square, DocuSign, PayPal, NVIDIA, Fujitsu, Accenture, Daimler, Overstock ... so everybody's got something going on, but nobody (at least nobody who's publicly traded and therefore eligible to be in an ETF) is betting their entire business on blockchain. It's a lot less speculative to invest in one of these funds than in crypto currency itself.

 

[OldShooter]

... It's a lot less speculative to invest in one of these funds than in crypto currency itself.

Agreed. But none of them have anything to do with crypto, which was the OP's idea for a speculation. And nothing any of your names do with blockchain will have a material effect on their business or their stock price. So, really, your "blockchain" funds are essentially partially diversified tech stock funds with above-average management fees. Hucksters.

 

[tenant13]

I won't argue with anyone about the nature of cryptos or whether they are purely speculative instruments or can in fact serve a storage of value - people need to make up their minds about that themselves - but I would suggest doing some simple YouTube research and generally getting familiar with the idea of blockchain and digital currencies. It's the future of money whether we like it or not and ignoring it now would be like ignoring internet 15 years ago. Once you understand what cryptos are, you could listen to something like this for an interesting take on the future of bitcoin: https://www.coindesk.com/preston-pysh-bitcoin-corporate-institutions

And if you want to use your IRA/ROTH IRA/Individual 401k to invest in cryptos, you can do it through self-directed IRA. There are a bunch of companies out there, I like https://www.rocketdollar.com/ because of their fee structure. It's not an endorsement or a recommendation but their website has a great knowledge base which will give you an idea how SDIRAs work and how can you use them to invest in something else than stocks or funds (it can be real estate or agriculture or precious metals...)

 

[NYEXPAT]

Rather than owning Bitcoin, I would recommend the Grayscale trust (GBTC) as well. Be aware that you are paying a premium which has ranged between 6% and 30% over it's lifetime. I only buy when it is between 6% and 10%. I do not currently own it.

I should add that the premium today is 18.5%!

 

[tenant13]

Rather than owning Bitcoin, I would recommend the Grayscale trust (GBTC) as well. Be aware that you are paying a premium which has ranged between 6% and 30% over it's lifetime. I only buy when it is between 6% and 10%. I do not currently own it.

I should add that the premium today is 18.5%!

It's certainly an option but one of the benefits of owning cryptocurrencies is that you are your own bank. Which comes with responsibilities (like making sure you don't lose your private keys) but makes the owner of cryptos completely independent form the traditional financial system and centralized institutions. Whether it's important to you or not is a separate issue but once you posses private keys to your cryptos no bank, credit card company or the likes of PayPal can interfere with you ability to conduct transactions - it's all done directly without any institution in the middle (this came in in handy for WikiLeaks when they were cut off from financial systems). You also don't ever have to worry about banks bankruptcies.

It's a feature of cryptos that we don't think a lot while investing but this ability to bypass financial system - and in extension censorship - is something I personally appreciate and support.

 

[pareshhb]

Many many thanks to everyone for their feedback. I have found it most informative.

 

[NYEXPAT]

It's certainly an option but one of the benefits of owning cryptocurrencies is that you are your own bank. Which comes with responsibilities (like making sure you don't lose your private keys) but makes the owner of cryptos completely independent form the traditional financial system and centralized institutions. Whether it's important to you or not is a separate issue but once you posses private keys to your cryptos no bank, credit card company or the likes of PayPal can interfere with you ability to conduct transactions - it's all done directly without any institution in the middle (this came in in handy for WikiLeaks when they were cut off from financial systems). You also don't ever have to worry about banks bankruptcies.

It's a feature of cryptos that we don't think a lot while investing but this ability to bypass financial system - and in extension censorship - is something I personally appreciate and support.

I certainly would not argue with you, valid points all!

 

[Spanky]

It's certainly an option but one of the benefits of owning cryptocurrencies is that you are your own bank. Which comes with responsibilities (like making sure you don't lose your private keys) but makes the owner of cryptos completely independent form the traditional financial system and centralized institutions. Whether it's important to you or not is a separate issue but once you posses private keys to your cryptos no bank, credit card company or the likes of PayPal can interfere with you ability to conduct transactions - it's all done directly without any institution in the middle (this came in in handy for WikiLeaks when they were cut off from financial systems). You also don't ever have to worry about banks bankruptcies.

It's a feature of cryptos that we don't think a lot while investing but this ability to bypass financial system - and in extension censorship - is something I personally appreciate and support.

Since it seems that you are so fond of cryptocurrency, what is the percentage of your portfolio invested in cryptocurrency? Are you prepared to lose every penny invested in cryptocurrency?

 

[tenant13]

Since it seems that you are so fond of cryptocurrency, what is the percentage of your portfolio invested in cryptocurrency? Are you prepared to lose every penny invested in cryptocurrency?

2.2% exactly as of Friday - and yes, I can totally lose it, I probably wouldn't even notice. But if I'm right, that 2.2% has a chance to outperform every other asset I have.

Chances are that if you own a broad market ETF you already have a small amount of BTC in your holdings: Vanguard and other financial institutions are holders of MicroStrategy (https://www.streetinsider.com/holdings.php?q=mstr) which recently converted half of its assets to bitcoin. https://news.bitcoin.com/billion-do...egy-250-million-btc-bitcoin-superior-to-cash/

My ownership of BTC has more to do however with its features that I mentioned above - I just want to support an alternative to the existing financial system.

 

[mrfeh]

2.2% exactly as of Friday .

Our cryptos are currently 1.4% of our entire portfolio.

I treat it as pure speculation. If it goes to $0, so be it.

 

[Spanky]

Our cryptos are currently 1.4% of our entire portfolio.

I treat it as pure speculation. If it goes to $0, so be it.

That's a good way of looking at it.

 

[Koolau]

Before I read this thread, I knew nothing about Crypto Currency. Now I know twice as much. Just wondering where are all the folks who say gold (which is real - as in, you can hold it in your fingers) is a bad, speculative, foolish, etc. etc. investment. I'm ignorant of Crypto Currency but it would seem to have ALL the issues of gold without the universal recognition of what it is. Just sayin' so YMMV.

 

[Chuckanut]

Crypto currencies.... backed by nothing, hawked by unknown people trying to make a fast buck, highly volatile, no legal bank guarantees of any kind, purely buyer beware. I bet Bernie Madhoff is mad as heck that he didn't think of them first.

 

[tenant13]

Crypto currencies.... backed by nothing, hawked by unknown people trying to make a fast buck, highly volatile, no legal bank guarantees of any kind, purely buyer beware. I bet Bernie Madhoff is mad as heck that he didn't think of them first.

You could make similar arguments about FIAT money. It's not like USD is backed by anything tangible (unless you think that “full faith and credit” of the U.S. Government can be quantified).

I think we can agree that FIAT is created at will by simply issuing debt - whether by commercial banks or by the Fed purchasing US Treasuries. That's not very different from blockchain technologies involved in creating cryptos except that in case of bitcoin the amount of coins created is capped at 21 million while supply of USD is unlimited.

As to the legal bank guarantees: you can't possibly think that ALL deposits are safely insured by FDIC? Not that it matters since you can always print as much USD as you want to meet your obligations.

Having said that, I totally agree that enthusiastically backing crypto currencies right now would not be prudent. Cautiously exploring the possibilities however while learning about the fundamentals will help you see where the future of finance is heading. Why not be ready? We may have to wait for the quantum computing for all the money to become digital but it's coming.

 

[VFK57]

If our or other major economic power Government(s) would see a threat from the blockchain Crypto, what do you think they would do? Both Gold and Crypto are US$ competitors but the difference is that Feds could print as much as they need, while they cannot do anything about two alternatives. Then the Gold could be confiscated, like in 1930s, Crypto will be hacked or forbidden to do any transaction with it. Still I think that PM is better alternative, just my opinion.

 

[NYEXPAT]

Bitcoin can't be hacked until there is quantum computing. I read a study recently that said 67% of HODLRS will hold Bitcoin even if it goes to 0. Currently do not own any but will be putting in about 3% of NW on this pullback.

 

[tenant13]

If our or other major economic power Government(s) would see a threat from the blockchain Crypto, what do you think they would do? Both Gold and Crypto are US$ competitors but the difference is that Feds could print as much as they need, while they cannot do anything about two alternatives. Then the Gold could be confiscated, like in 1930s, Crypto will be hacked or forbidden to do any transaction with it. Still I think that PM is better alternative, just my opinion.

There's definitely lots of things that could happen to cryptocurrencies, good and bad - hence nobody's advocating for trading your FIAT savings into cryptos. US ban on bitcoin is unlikely however (https://www.forbes.com/sites/ktorpe...realizing-they-cant-ban-bitcoin/#2bd316193e31)

Personally I'm fairly bullish on bitcoin and I'm putting (some of) my money where my mouth is but it's mostly because I support the idea behind it, how decentralized and uncontrollable it is and its limited supply. But most of all I appreciate bringing monetary policy discussion - or even general discussion about nature of money - to the forefront.

 

[Chuckanut]

You could make similar arguments about FIAT money. It's not like USD is backed by anything tangible (unless you think that “full faith and credit” of the U.S. Government can be quantified).

I think we can agree that FIAT is created at will by simply issuing debt - whether by commercial banks or by the Fed purchasing US Treasuries. That's not very different from blockchain technologies involved in creating cryptos except that in case of bitcoin the amount of coins created is capped at 21 million while supply of USD is unlimited.

As to the legal bank guarantees: you can't possibly think that ALL deposits are safely insured by FDIC? Not that it matters since you can always print as much USD as you want to meet your obligations.

Having said that, I totally agree that enthusiastically backing crypto currencies right now would not be prudent. Cautiously exploring the possibilities however while learning about the fundamentals will help you see where the future of finance is heading. Why not be ready? We may have to wait for the quantum computing for all the money to become digital but it's coming.

I will take a currency backed by the economic strength of a nation-state.

We will have to agree to disagree.

 

[tenant13]

The American dollar is backed by the collective economic strength of the USA. You can take those dollars an buy food, housing, transportation, vacations, etc. It does not go up and down in wild swings that could wipe people out.

It's important to understand what real wealth is. Real wealth is being able to produce goods and services that other people want and are willing to trade to get them. The inventors and managers of crypto currencies produce nothing but crypto currencies.

We will have to agree to disagree.

Absolutely. I don't think that even Nobel winning economists agree on economic and monetary policies. Besides, I'm not in a panic mode when it comes to USD and I haven't joined crypto cult. Imo USD is not going anywhere for as long as I'll be alive (57 atm): it's not just backed by "the collective economic strength of the USA" (a real thing despite China's rise) but also its military and Bretton Woods agreement that pegged world currencies to the dollar. That, and the fact that most world's debt is denominated in USD makes $ our number 1 export product. We can easily print our way from any crisis.

So I'm not trying to say that Bitcoin will replace USD as a currency (it's not even designed for that given how long it takes for every transaction to be confirmed). All I'm suggesting is that there is a strong possibility BTC could become a viable storage of value and a hedge to inflation.

A good analogy would be the birth of the internet and the introduction of e-commerce. It wasn't smooth sailing (dot-com bubble comes to mind) and it did not wipe off brick and mortar stores but the world is a different place now and if you believed in Amazon even a little bit when it all started you'd be better off now that if you dismissed it.

 

[OldShooter]

Bitcoin can't be hacked until there is quantum computing.

Really? You're an expert on the mathematics here? From a career in high tech I can tell you that pronouncements using words like "always," "never," and "can't" often die a quick death.

I read a study recently that said 67% of HODLRS will hold Bitcoin even if it goes to 0.

Complete nonsense. No one could possibly know the intent of all Bitcoin holders even without considering the anonymity factor.

Currently do not own any but will be putting in about 3% of NW on this pullback.

So you are really not at all confident in your beliefs.

Taleb's position is "Don't tell me what you think. Show me your portfolio." I am increasingly seeing the wisdom in that.