Category: Crypto Investment

Self-Directed IRA

Why a Self-Directed IRA is the Perfect Tool for Bitcoin Investing

Posted on | by BitcoinIRA

In today’s rapidly changing financial landscape, it has become more important than ever to plan for the future and build wealth that can withstand the test of time. With traditional investment options becoming increasingly volatile, many investors are turning to alternative methods to secure their financial futures. One such method is through a Self-Directed Individual Retirement Account (IRA). In this article, we will explore the concept of building wealth for the future and why a Self-Directed IRA is the perfect tool for investing in Bitcoin. 

What is a Self-Directed IRA? 

A Self-Directed IRA is a type of individual retirement account that allows investors to have more control over their investment decisions. Unlike a regular IRA, which limits investment options to stocks, bonds, and mutual funds, a Self-Directed IRA gives investors the freedom to invest in a wide range of alternative assets, including cryptocurrencies like Bitcoin. This flexibility opens up a whole new world of investment opportunities for those looking to diversify their portfolios and potentially achieve higher returns. 

Benefits of a Self-Directed IRA for Bitcoin investing 

Investing in Bitcoin through a Self-Directed IRA offers several unique benefits. Firstly, it allows investors to take advantage of the tremendous growth potential of cryptocurrencies. Bitcoin, in particular, has seen exponential growth in recent years, making it an attractive investment option for those looking to build wealth. Additionally, investing in Bitcoin through a Self-Directed IRA provides investors with the added advantage of tax benefits.   

Contributions made to a traditional Self-Directed IRA may be tax-deductible, and any earnings generated within the account are tax-deferred, allowing investors to maximize their returns.  

How to set up a Self-Directed IRA for Bitcoin investing 

Setting up a Self-Directed IRA for Bitcoin investing is a relatively straightforward process. First, you will need to find a retirement account provider that specializes in alternative investments, such as cryptocurrencies. Once you have chosen a provider, you will need to open an account and fund it with the desired amount.  The provider will then guide you through the process of purchasing and holding Bitcoin within your Self-Directed IRA.  It is important to note that the IRS has specific guidelines regarding the ownership and storage of digital assets within an IRA, so it is crucial to work with a knowledgeable custodian who can ensure compliance such as BitcoinIRA. 

Tips for successful Bitcoin investing with a Self-Directed IRA 

To maximize your chances of successful Bitcoin investing with a Self-Directed IRA, it is important to follow a few key tips. Firstly, stay informed about the latest developments in the cryptocurrency market. Stay up to date with news, industry trends, and regulatory changes that can impact the price of Bitcoin. Secondly, set realistic investment goals and stick to your investment strategy. Avoid making impulsive decisions based on short-term market fluctuations. Lastly, consider working with a financial advisor who specializes in cryptocurrencies. Their expertise can help guide you through the complexities of Bitcoin investing and ensure that you make informed decisions. 

Common mistakes to avoid when investing in Bitcoin with a Self-Directed IRA 

When investing in Bitcoin with a Self-Directed IRA, it is crucial to avoid common mistakes that can potentially jeopardize your investment. One of the most common mistakes is investing more than you can afford to lose. While Bitcoin has the potential for significant returns, it is important to only invest what you are willing and able to lose.  Lastly, avoid making emotional investment decisions. It is important to make investment decisions based on sound analysis and research rather than being swayed by market hype or fear. 

Alternative cryptocurrencies to consider for Self-Directed IRA investing 

While Bitcoin is the most well-known and widely accepted cryptocurrency, there are several alternative cryptocurrencies worth considering for Self-Directed IRA investing. Ethereum, for example, is the second-largest cryptocurrency by market capitalization and offers a unique platform for decentralized applications. Litecoin is another popular cryptocurrency that offers faster transaction times and lower fees compared to Bitcoin. Ripple, on the other hand, focuses on facilitating fast and low-cost international money transfers. By diversifying your cryptocurrency holdings within your Self-Directed IRA, you can potentially minimize risk and take advantage of the unique features offered by different cryptocurrencies. 

So, why a Self-Directed IRA is the perfect tool for Bitcoin investing 

In conclusion, a Self-Directed IRA offers a unique and powerful tool for building wealth for the future through Bitcoin investing. With its flexibility, tax benefits, and potential for high returns, a Self-Directed IRA opens up a world of opportunities for investors looking to diversify their portfolios and take advantage of the growth potential of cryptocurrencies. However, it is important to approach Bitcoin investing with caution and to have a solid understanding of the risks involved. By following the tips and avoiding common mistakes outlined in this article, investors can maximize their chances of success in the world of Bitcoin investing. So, if you are ready to take control of your financial future and explore the world of Bitcoin investing, open a Self-Directed IRA account today through BitcoinIRA.com. 

 

Bitcoin IRA is a platform that connects consumers to qualified custodians, digital wallets and cryptocurrency exchanges. The company is not a custodian, is not a digital wallet and is not an exchange. The information provided in this article is for educational purposes only. We encourage you to consult an adviser or professional to determine whether Bitcoin IRA makes sense for you. 

 

The Financial Independence, Retire Early (FIRE) movement

How Crypto IRAs are Reshaping the FIRE Movement

Posted on | by BitcoinIRA

The Financial Independence, Retire Early (FIRE) movement has gained significant traction in recent years, as individuals strive to achieve financial independence and retire at a younger age. The core principle of the FIRE movement is to save and invest a substantial portion of one’s income to achieve financial freedom sooner rather than later. In this article, we will explore how Crypto IRAs are revolutionizing the FIRE movement and reshaping retirement savings. 

Benefits of Crypto IRAs for Retirement Savings 

One of the most exciting developments in the world of retirement savings is the emergence of Crypto IRAs. A Crypto IRA is a self-directed individual retirement account that allows investors to include cryptocurrencies, such as Bitcoin (BTC) and Ethereum (ETH), as part of their retirement portfolio. This presents several significant benefits for those looking to retire early and achieve financial independence. 

Firstly, Crypto IRAs offer the potential for substantial returns on investment. Cryptocurrencies have been known to deliver unparalleled gains, and by including them in your retirement portfolio, you have the opportunity to capitalize on this potential growth. Additionally, the decentralized nature of cryptocurrencies provides a hedge against traditional financial markets, offering diversification and reducing risk. 

Moreover, Crypto IRAs provide increased accessibility and control over your retirement funds. Unlike regular IRAs, which are often managed by third-party custodians, Crypto IRAs allow investors to have full control over their assets. This means you can make investment decisions quickly, without the need for intermediaries, and take advantage of market opportunities as they arise. 

How Crypto IRAs are Revolutionizing the FIRE Movement 

Crypto IRAs are bringing a new level of innovation and excitement to the FIRE movement. By introducing cryptocurrencies into the retirement savings equation, individuals have the potential to accelerate their journey towards financial independence. The volatility of cryptocurrencies, combined with their potential for exponential growth, aligns perfectly with the goals of the FIRE movement. 

Traditionally, the FIRE movement has relied on a combination of aggressive saving, index fund investing, and real estate to amass enough wealth to retire early. While these strategies have proven successful, the addition of Crypto IRAs opens up new avenues for wealth accumulation. By investing in cryptocurrencies, FIRE movement adherents can potentially achieve their financial goals in a shorter timeframe. 

Furthermore, Crypto IRAs offer a level of flexibility that regular retirement accounts do not. With a Crypto IRA, you have the freedom to choose which cryptocurrencies to include in your portfolio, allowing for greater customization and alignment with your investment strategy. This flexibility empowers individuals to take a more active role in managing their retirement savings and potentially optimizing their returns. 

Tax Implications of Crypto IRAs 

As with any investment, it is crucial to consider the tax implications of Crypto IRAs. While cryptocurrencies offer exciting opportunities for growth, they also come with unique tax considerations that must be taken into account. 

In the United States, the Internal Revenue Service (IRS) treats cryptocurrencies as property for tax purposes. This means that any gains from the sale or exchange of cryptocurrencies are subject to capital gains tax. The tax rate depends on how long you held the cryptocurrency before selling it. If you held it for less than a year, the gains are considered short-term and taxed at your ordinary income tax rate. If you held it for more than a year, the gains are considered long-term and are subject to capital gain tax rates. However, there are certain tax advantages to holding cryptocurrencies within a Crypto IRA. With a Crypto IRA, you do not pay capital gain taxes. In addition, depending on the type of IRA, you can either defer taxes until you make withdrawals in retirement or potentially grow your IRA investments tax-free. This allows you to maximize your returns. It is important to consult with a tax professional or financial advisor to ensure you understand the specific tax implications of Crypto IRAs.  

Investing Strategies for Crypto IRAs 

When it comes to investing in Crypto IRAs, there are several strategies you can consider. The best strategy for you will depend on your risk tolerance, investment goals, and time horizon. Here are a few popular investing strategies to consider: 

  1. Dollar-Cost Averaging (DCA):

    DCA involves investing a fixed amount of money at regular intervals, regardless of the cryptocurrency’s price. This strategy helps mitigate the impact of short-term price volatility and allows you to accumulate cryptocurrencies over time.

  2.  Buy and Hold:

    The buy and hold strategy involves purchasing cryptocurrencies with the intention of holding them for an extended period. This strategy requires patience and a long-term outlook, as it is based on the belief that the value of cryptocurrencies will increase over time.

  3. Active Trading:

    Active trading involves buying and selling cryptocurrencies frequently to take advantage of short-term price fluctuations. This strategy requires in-depth market knowledge and technical analysis skills. 

It is important to note that investing in cryptocurrencies carries inherent risks, and past performance is not indicative of future results. It is crucial to conduct thorough research and stay informed about market trends. 

Embracing the Future of Retirement Savings with Crypto IRAs 

The FIRE movement has empowered individuals to take control of their finances and work towards achieving financial independence. With the emergence of Crypto IRAs, retirement savings have entered a new era of innovation and potential. By including cryptocurrencies in your retirement portfolio, you can potentially accelerate your journey towards early retirement and financial freedom. 

Crypto IRAs offer numerous benefits, including the potential for higher returns, increased accessibility and control, and diversification opportunities. However, it is important to carefully evaluate the pros and cons of Crypto IRAs and consider your risk tolerance and investment goals before making a decision. 

As you embark on your Crypto IRA journey, remember the importance of diversification, managing tax implications, and implementing a sound investment strategy. By staying informed, seeking professional advice, and staying disciplined, you can embrace the future of retirement savings and potentially reap the rewards of the Crypto IRA revolution. 

Ready to start your journey towards a diversified and secure Crypto IRA? Create your Crypto IRA with BitcoinIRA.com. For questions contact our customer support by calling us at 8665701947, sending us an email to [email protected] or scheduling a call with a Bitcoin IRA Specialist. 

 

 

Bitcoin IRA is a platform that connects consumers to qualified custodians, digital wallets and cryptocurrency exchanges. The company is not a custodian, is not a digital wallet and is not an exchange. The information provided in this article is for educational purposes only. We encourage you to consult an adviser or professional to determine whether Bitcoin IRA makes sense for you. 

 

Bitcoin Halving

The Impact of Bitcoin Halving on the Cryptocurrency Market

Posted on | by BitcoinIRA

What is Bitcoin halving?

Bitcoin halving is an event that occurs approximately every four years in the world of cryptocurrency. It is a process that reduces the reward miners receive for mining new bitcoins by 50%. This event is programmed into the Bitcoin protocol and is a crucial element in controlling the supply and inflation of Bitcoin. By understanding the concept of Bitcoin halving, investors and enthusiasts can gain insights into the cryptocurrency market and make informed decisions. 

Understanding the significance of Bitcoin halving

Bitcoin halving plays a significant role in the cryptocurrency market. It is designed to maintain scarcity and prevent inflation by reducing the rate at which new bitcoins are created. With a fixed supply of 21 million bitcoins, halving ensures that the supply is released gradually over time, mirroring the scarcity of precious metals like gold. This scarcity is a key factor in the value proposition of Bitcoin and contributes to its appeal as a store of value and potential hedge against fiat currency inflation. 

Moreover, Bitcoin halving acts as an incentive for miners to continue securing the network. By reducing the mining reward, it encourages miners to seek more efficient and cost-effective ways to mine Bitcoin. This, in turn, promotes technological advancements and increases the overall security of the Bitcoin network. 

The history of Bitcoin halving events

Since its inception in 2009, Bitcoin has experienced three halving events. The first halving occurred in 2012, reducing the mining reward from 50 bitcoins per block to 25 bitcoins. The second halving took place in 2016, further reducing the reward to 12.5 bitcoins. The most recent halving event was in May 2020, cutting the reward to 6.25 bitcoins. 

Each halving event has had a profound impact on the cryptocurrency market. Historically, Bitcoin’s price has experienced significant volatility leading up to and following these events. The anticipation of reduced supply has often driven up the price in the months preceding halving, while the actual event sometimes triggers short-term price corrections. 

Impact of Bitcoin halving on the cryptocurrency market

Bitcoin halving has a ripple effect on the entire cryptocurrency market. As the leading cryptocurrency, Bitcoin sets the benchmark for other cryptocurrencies. The reduction in mining rewards has the potential to affect the profitability of mining operations, leading to shifts in miners’ behavior and the overall hash rate of the network. 

Additionally, Bitcoin halving often attracts media attention and increases public awareness of cryptocurrencies. This heightened interest can result in increased trading volumes and price volatility across various cryptocurrencies as investors seek opportunities in the market. 

How does Bitcoin halving affect the price of BTC?

The impact of Bitcoin halving on the price of BTC is a topic of much speculation and debate. While there is no definitive answer, historical data provides some insights. In the months leading up to previous halving events, Bitcoin’s price has witnessed significant upward momentum as traders and investors anticipate reduced supply. 

However, immediately following halving, Bitcoin has experienced short-term price corrections. This is believed to be due to profit-taking by miners and traders who had accumulated Bitcoin in anticipation of the event. Nonetheless, in the longer term, Bitcoin’s price has generally trended upwards following halving events, driven by increased demand and limited supply. 

Predictions and expectations for the next Bitcoin halving

The next Bitcoin halving is expected to occur in 2024, approximately four years after the previous halving. While it is challenging to predict the exact impact on Bitcoin’s price and the cryptocurrency market, some analysts and experts have shared their expectations. 

Many believe that the next halving will continue the trend of increased interest and demand for Bitcoin. The growing acceptance of cryptocurrencies by institutional investors and the general public, coupled with the scarcity created by halving, could potentially drive Bitcoin’s price to new heights.  

Strategies for investing during Bitcoin halving

Investing during Bitcoin halving requires careful consideration and a long-term perspective. One strategy is to accumulate Bitcoin gradually over time, taking advantage of any price dips or corrections that may occur leading up to and following halving. This approach allows investors to spread their risk and potentially benefit from the long-term appreciation of Bitcoin’s value. 

Another strategy is to diversify one’s cryptocurrency portfolio. While Bitcoin is the dominant cryptocurrency, other cryptocurrencies may also experience significant price movements during halving events. Investing in a range of cryptocurrencies can help mitigate risk and potentially capture additional opportunities in the market. 

Factors to consider before and after Bitcoin halving

Before investing or making decisions based on Bitcoin halving, it is crucial to consider various factors. These factors include the overall market sentiment, regulatory developments, technological advancements, and macroeconomic conditions. Additionally, understanding the fundamental principles of Bitcoin, such as its decentralized nature and use cases, can provide valuable insights into its long-term potential. 

After halving, monitoring the market closely is essential. Observing the behavior of miners, the overall hash rate, and any changes in trading volumes can provide indications of potential market trends. It is also important to stay informed about any updates or news related to Bitcoin and the broader cryptocurrency market. 

Conclusion

Bitcoin halving is an essential event in the world of cryptocurrency that has far-reaching implications for the market. By reducing the mining reward and maintaining scarcity, halving ensures the controlled release of new bitcoins and influences the price dynamics of Bitcoin and other cryptocurrencies. Understanding the significance of halving and its historical impact can be valuable for investors and enthusiasts looking to navigate the cryptocurrency market effectively. 

While the exact impact of Bitcoin halving on the price of BTC remains uncertain, the historical data and market trends suggest that halving has generally led to increased interest and demand for Bitcoin. 

As the cryptocurrency market continues to evolve, Bitcoin halving will remain a pivotal event, shaping the future of cryptocurrencies and their role in the global financial landscape. Whether you are a seasoned investor or a curious enthusiast, keeping a close eye on halving events and staying informed about the latest developments can provide valuable insights and opportunities in the exciting world of cryptocurrencies. 

Open an account at BitcoinIRA to start your cryptocurrency investment journey today.  

 

Bitcoin IRA is a platform that connects consumers to qualified custodians, digital wallets and cryptocurrency exchanges. The company is not a custodian, is not a digital wallet and is not an exchange. The information provided in this article is for educational purposes only. We encourage you to consult an adviser or professional to determine whether Bitcoin IRA makes sense for you.   

A graphic of financial charts is superimposed over gold coins

Guide to Understanding Interest Rates, Crypto and Inflation

Posted on | by BitcoinIRA

Everything from rent and mortgage payments to car loans and a loaf of bread is much more expensive than just a year ago.

The last time the United States faced double-digit inflation rates was in the 1970s. Though the Great Inflation started in the 1960s, the height of the period was marked by high oil prices in the ‘70s, which spiked the cost of gasoline. But, like today, many major global events that helped drive and define inflation took place during this time.

While the situation is a little different in the 21st century, the last few years have been the perfect storm for large-scale economic losses and rampant inflation.

What does this mean for investors watching rising interest rates, their crypto, and inflation? It helps to understand how we got here.

What Led to Recent Inflation?

Central banks worldwide responded to the COVID-19 pandemic shutdowns by initially dropping interest rates and kicking off purchasing programs. In the U.S., that included rates for corporate bonds in addition to mortgage-backed securities (MBS) and government bonds and loan programs, marking the most significant purchase program to date.

Simultaneously, national governments were conducting sizeable fiscal stimulus programs in which citizens received checks in the mail while several programs were made available to apply for assistance. These programs flooded the system with additional cash. When money is released to Main Street, it commonly goes back into the economy quickly; in other words, people spend it on food, electronics, cars, and upgrading housing instead of investing it for the long term.

On top of this, the worldwide pandemic shutdown caused supply chains to slow down or stop and become backed up. The bubbling brew of huge consumer demand, a shortage of workers, reduced distribution of goods, war in Ukraine, and anticipated demand for energy caused the largest spike of inflation the country had seen in decades.

How Does Crypto Respond During Inflation

Understanding the impact of crypto and inflation starts by visualizing how digital currencies fit into a modern economy. For example, Bitcoin’s creation was a response to what its developers saw as poor governmental and monetary management.

So, it’s hard to compare Bitcoin and other cryptocurrencies to the fiat brand of money we are used to because it’s an entirely new concept. This is why many investors are asking the question: is Bitcoin a good hedge against inflation? That may be a difficult question to answer immediately, which is why long-term diversification with crypto is more vital for investors.

The great thing about cryptocurrencies is that they stand on their own. Each is created from a digital process — whether mining or staking — and not by people borrowing to get ahead, like the fiat system. As a result, cryptocurrencies offer investors the opportunity to accumulate wealth outside the traditional financial systems.

Here is why this is important: Bitcoin and other cryptocurrencies were designed to be disinflationary. As more of each currency is created, the more difficult they become to create, reducing their risk of losing their monetary impact or purchasing power.

Inflation in a debt-backed currency is consistently positive, with variations in the inflation rate. This system is not sustainable because as more money is printed, that money thus has less purchasing power, meaning that eventually, a loaf of bread could theoretically cost $1 million because its purchasing power has been reduced.

The move to a fiat system was executed with the idea that inflation could be controlled at 2%, allowing the system to operate for hundreds of years without issues. The concept was simple: inflation would not affect the people because the increase in the population and wages would offset its effects.

The only problem is that controlling inflation in such a large and complex system is nearly impossible. Once President Richard Nixon ended the gold standard in 1971, the amount of debt in the U.S. ballooned with no end in sight because the currency is backed by debt. For more currency to be printed, more debt needs to be taken on.

Cryptocurrency as a Long-Term Investment

These examples show how the plan for a debt-backed fiat currency adjusts for the average investor during inflation. However, because there is only so much Bitcoin or any other type of cryptocurrency, the race to zero and infinitely high prices is avoided.

Interest in Central Bank Digital Currency (CBDC) is rising. It can be expected that the price of whatever cryptocurrency each nation chooses will increase until demand plateaus as everyone using it acquires the amount they need to achieve financial homeostasis. At this point, the rate of increased money supply slows until the last coin is created, allowing the currency to retain its early-day levels of purchasing power — because the total supply is restrained.

This makes cryptocurrencies an extremely attractive long-term investment. Why? When the world begins to utilize digital currency universally, record-keeping technology is an excellent way for companies to save money on general bookkeeping and data storage.

Crypto vs. Inflation

So, are cryptocurrencies a good hedge against inflation? The answer will pan out in the long term, though expectations are high. What is the best way to invest in this idea? Financial advisors are beginning to recommend removing long-term investments from the traditional financial system, and opening a tax-sheltered retirement account makes the most sense.

To invest in digital currency with more than 60 cryptos, investors can choose Bitcoin IRA,* the first digital asset IRA provider.

Opening an account is simple and much faster than traditional institutions. Bitcoin IRA provides the best crypto IRA security** with BitGo, live customer service, and plenty of education to speed up your knowledge base on crypto assets. Download the app or head over to Bitcoin IRA and learn more today!


*Alternative IRA Services (“AIS”) dba BitcoinIRA.com is a platform that connects consumers to qualified custodians, digital wallets and cryptocurrency exchanges. The company is not a custodian, is not a digital wallet and is not an exchange.

**Security, storage, wallet providers, and insurance may vary based on asset chosen and custody solution available.

A phone displays the words “FedNow 24/7 Instant Payments” in front of a circle inscribed with an eagle and the words “United States Federal System”

What does FedNow Mean for Crypto?

Posted on | by BitcoinIRA

The recent launch of the Federal Reserve’s instant payment system FedNow has raised concerns among crypto enthusiasts. Could it be a threat to crypto? Find out why FedNow was created, what it is, how it compares to crypto, and what if any competition it presents for the crypto space.

Why was FedNow developed?

FedNow was created in direct response to one key problem: the Federal Reserve’s back-end payment system was simply in need of a long overdue upgrade. It was essentially developed to bring the previous system up to the speed that European countries and foundational cryptocurrencies have been comfortable with for years.

Prior to the launch of FedNow, Automated Clearing House (ACH) payments were completed in batches once a day, so it normally took one to three days (if not weeks) for domestic payments to be processed. Instant payments are now possible for opted-in U.S. banks, thanks to this system upgrade.

Will FedNow replace crypto?

While instant settlements are one of FedNow’s notable similarities to crypto, there are still a number of differences between what FedNow and cryptocurrencies, such as stablecoins, offer.

With the FedNow upgrade, “banks and credit unions of all sizes can sign up and use this tool to instantly transfer money for their customers, any time of the day, on any day of the year.” In other words, the FedNow is only available for use by opted-in United States-based financial institutions and “a bank account is required,” according to Blockworks.

Crypto on the other hand is a borderless payment solution for the underbanked and unbanked. Its decentralized nature allows “crypto-to-crypto exchanges,” which means you don’t need to be a bank, have a bank account, or opt-in to an institution to send or receive crypto. While transaction fees may be applied to some cryptocurrencies, unlike banks, they do not charge remittance fees for international transfers.

While FedNow modernizes U.S. bank payment infrastructure, it doesn’t replace the majority of use cases for crypto due to its restricted market reach, cross-border limitations, and infrastructural constraints. It may even open doors for increased crypto adoption in the future, which will be of interest to potential BItcoin IRA investors.

 

Bitcoin $30k: the important price milestone for Bitcoin, $30,000, is shown in large text on an orange background, with an image or a rocket.

Bullish BTC Charges Toward $30K as Macro Tides Turn

Posted on | by [email protected]

Despite strong year-to-date price appreciation over 77% and a mid-April $30k peak for Bitcoin after the frosty crypto winter of 2022, BTC and general crypto-wide performance has broadly lagged since late March of this year. That may be all about to change on the tail of recent Federal Reserve rate hikes, a projected friendlier macro environment, and current events that play squarely to the inherent strengths of the world’s #1 cryptocurrency.

On Wednesday the Fed signaled its commitment to shrinking inflation with yet another 25 basis-point rise to the federal funds rate. Despite this, as is often the case, markets at least in-part took the action not as a marker of continued economic challenge, but instead as a harbinger of an inevitable pivot to avert recession. As a result, crypto rose slightly, and stocks, banking sector aside, dipped then recovered to avoid any particularly significant decline.

The market interpretation is not entirely unfounded – CME Group’s FedWatch probabilities indicator agrees, suggesting “no change” as the most likely state of rates for June and July, followed by a 75% chance of slashing in September. This would conveniently occur when approximately six to eight months remain before the renowned Bitcoin halving event, a historical signal of eye-watering crypto bull runs to come. These tend to last approximately 18 months and culminate with blowoff tops, memes (already begun), and NFT mania of epic proportion.

Of course, such charges are always led and must be affirmed by Bitcoin, the asset to which all crypto liquidity is tied, and thus by which all digital currency price action is guided, whether we like it or not. Thankfully, beyond just reverse-psychology interpretation of Federal Reserve behavior, recent news of bank failures that spooks traditional markets simply emboldens Bitcoin’s entire raison d’etre. Beyond broad investor sentiment, there remains no technical reason why a decentralized, trustless, and peer-to-peer store of value is required to move in price alongside its polar opposite. In fact, when it comes to the dollar, Bitcoin’s tendency has been to do just the reverse.

When banks become illiquid or fail, but rate hikes and credit squeezes mean money printing can’t save the day, Bitcoin remains 100% backed by computational power and the perpetual hard energy (approximately 127 TWh yearly) required to mine it. From a broad view, it doesn’t particularly matter what the news cycle throws at Satoshi Nakamoto’s invention, as price has historically and consistently followed hash rate, and the mathematics and incentives of the Bitcoin protocol ensure this phenomenon can continue.

If 2008-like events continue to unfold with regard to the banking sector, investors and holders of currency in general may have a decision to make. Who do you trust – financial institutions stuck holding government debt, the government itself with its steadfast but limited FDIC, or the ability to hold an asset that requires you trust nobody at all? While proclamations of an imminently failing U.S. dollar may often be hyperbolic, the history and average lifespan of fiat currency is clear, suggesting at the very least, USD and some of its modern brethren may be living on borrowed time.

Bitcoin reaching $30k this market cycle has been described as a key battle line, and once this resistance becomes support, most signs suggest Bitcoin will proceed to do what it has always done. As the saying goes to describe the Bitcoin network’s unconcern for the ongoing mania of current events: tick-tock, next block.

Bitcoin IRA | Crypto & Bitcoin IRA Taxes

Cryptocurrency & Bitcoin IRA Tax Rules

Posted on | by [email protected]

How Is Crypto Taxed in the United States?

It’s important for investors, including those with cryptocurrency IRAs, to understand how taxes affect their accounts. Cryptocurrencies are treated as property according to the IRS, just like many other investments. Every sale may cause a taxable event, with only a few exceptions. But if you hold your cryptocurrencies within a crypto IRA, you may receive tax-free or tax-deferred growth, depending on the account type.

There are some instances where certain activities that involve cryptocurrencies can be treated as income, and thus be subject to income tax. When cryptocurrencies aren’t within crypto IRAs, capital gains taxes typically apply when any of the following events occur:

  • Selling cryptocurrency for traditional currency.
  • Using cryptocurrency to purchase goods and services.
  • Trading one cryptocurrency for another on an exchange or peer-to-peer.

Income tax may be applied when any of the following events occur:

  • Receiving cryptocurrency from an airdrop.
  • Interest earned from decentralized finance lending.
  • Income earned crypto mining from block rewards and transaction fees.
  • Crypto earned from liquidity pools and staking.
  • Receiving cryptocurrency as a means of payment for services.

Do You Have to Claim Taxes from Holdings in Your Bitcoin IRA?

It’s important to see a crypto IRA as a long-term investment in order to refrain from taking distributions before the retirement age of 59½. This is because early withdrawals may be subject to tax penalties, unless the withdrawal is for specific hardships  defined by the IRS.

Will BitcoinIRA Send Me a 1099-Form?

There are several different types of 1099 forms that you may receive regarding your cryptocurrency investments; you may receive all of them, some of them, or none of them. As cryptocurrency continues to become more federally regulated, all cryptocurrency exchanges may need to comply with regulations concerning the creation of proper tax documentation.

Here are brief descriptions of the various 1099 documents that may be entailed by cryptocurrency and IRAs.

1099-R: Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contract, etc.: IRS information can be reported on a 1099-R if there is a distribution of $10 or more. Plan or account custodians typically issue a 1099-R for the IRS, recipient, and state or local tax department. If you receive an eligible distribution from accounts such as IRAs, profit-sharing plans, retirement plans, pensions, annuities, and so forth, you should get a 1099-R.

1099-B: Proceeds from Broker and Barter Exchange Transactions: A 1099-B form will display all your transactions by showing the purchase price, sales price, and any resulting gain or loss from the sale of crypto.

1099-INT: Interest Income: A 1099-INT form will show interest income that is taxable as ordinary income.

Can Taxes Be Avoided by Investing in a Bitcoin IRA?

Yes, some taxes can be avoided by using a Bitcoin IRA. We offer two types of cryptocurrency IRAs, Traditional and Roth. Traditional Bitcoin IRAs are tax-deferred, whereas Roth Bitcoin IRAs can potentially grow tax-free, depending on the assets chosen. Also, avoiding taxes on capital gains could potentially save you money. This means you’ll be able to enjoy more of your own money during retirement, as opposed to other investment strategies that don’t offer such protection. That said, it’s helpful to remember that you can be subject to penalties if distributions occur before you reach the age of 59½.

Does the IRS Track Bitcoin IRA Activity?

Technically, the IRS cannot track every Bitcoin or cryptocurrency transaction and is instead relying on individuals to comply in good faith. It has only been since 2014 that the IRS has begun to tax cryptocurrency. Since then, they have mainly targeted individuals who have had at least $20,000 in transactions in any given tax year.

For example, the IRS has historically filed court summons’ that seek similar information from other exchanges. In one example, the IRS requested account registration information, account activity records, and other materials for customers (who had at least $20,000 in transactions in any tax year from 2016 to 2020) from Circle Internet Financial, a cryptocurrency exchange based in Boston.

In recent years, the IRS has filed other court summons seeking similar information from other exchanges. However, the IRS doesn’t track every crypto transaction. Because crypto is treated like stocks, bonds, or other capital assets, you are required to be fully transparent with the IRS on your tax return. This means your tax return will need to indicate if you’ve transacted in cryptocurrency.

Essentially, it is up to individuals, currency exchanges, and cryptocurrency IRA firms to report transactions and to produce 1099 tax forms each year.

How Do I Report Taxes on My Cryptocurrency IRA Savings?

As long as you keep the money in your Bitcoin IRA, you should not need to report any gains or losses on your investments. That’s because IRAs are tax-sheltered. What this means is that no taxes are incurred while the money is in the account. Once you begin to take distributions from your IRA at retirement age, you will need to take possible taxes into consideration

Short-Term Capital Gains Tax

Short-term capital gains taxes are often higher than long-term capital gains taxes. For example: For the 2022 tax year, if you purchase crypto for $50,000 and then sell it for $150,000 six months after you purchased it, you will pay short-term capital gains taxes on $100,000. Short-term capital gains are subject to taxation as ordinary income at graduated tax rates. IRAs are often used to help individuals avoid capital gains tax because capital gains tax will not apply to distributions from a retirement account

Long-Term Capital Gains Tax

Long-term capital gains tax is applied to the profit from the sale of any property that has been in one’s possession for more than one -year from the purchase date. The term “property” is applied to real estate, precious metals, stocks, bonds, and cryptocurrency. The tax rate is determined by a graduated threshold for taxable income at 0%, 15%, or 20%. As mentioned above, you can use an IRA to defer paying taxes as you will not be taxed until money or assets distributed from the IRA

BitcoinIRA is the world’s first, largest, and most secure cryptocurrency IRA platform used by more than 170,000 users. BitcoinIRA clients can take advantage of the numerous tax benefits that an IRA offers while investing in the long-term potential that cryptocurrency brings. In addition, users can buy and sell online any time with the BitcoinIRA platform, which contains built-in live price tracking, portfolio performance metrics, and educational articles and videos. Our platform offers world-class security1 with up to $7002 million custody insurance.

If you’ve been considering entering the crypto market but are unsure of how to begin, signing up for with BitcoinIRA could be a great way to plan for your future and your long-term financial goals.

 

Buy & sell crypto online 24/7 using an industry-leading platform. . . get started with Bitcoin IRA today!

1Security may vary based on asset chosen and custody solution available.

2Insurance may vary based on asset chosen and custody solution available.

 

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Several physical Bitcoin, from small to large, with a price uptrend arrow displayed above them.

What’s Behind the Recent Crypto Rally?

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Bitcoin and Ethereum have seen significant price gains since the start of 2023, and especially this past weekend. The predominant cryptos jumped over 12% beginning Friday, and more than 30% from December lows, bringing them over $23,000 and $1,500, respectively. While crypto winter has been in effect for over a year now, the end was not necessarily in sight before the recent leg up. What changed, and what may be driving the crypto rally and improved outlook? Read on to find out. 

The obvious catalyst of good news was the recent Consumer Price Index reading for December 2022, dropping 0.1% from the prior month. While it may not sound like much, more important was the year-over-year (y/o/y) calculation – a 6.5% increase in inflation, versus 7.1% y/o/y for November. While still a high reading, it signals a significant improvement, and suggests the Federal Reserve may not need to hike interest rates so aggressively throughout the remainder of 2023, if at all. Naturally, the portent of looser monetary policy, even if up to a year away, is positive for cryptocurrency, an asset class often seen as a hedge against inflation. 

Macro conditions aside, there’s also a crypto-specific reason for Bitcoin and altcoins’ new-year price performance. Difficulty, which measures how demanding it is for mining hardware to create a block (and thus new Bitcoin) on the network, rose to its all-time high today, reaching 37.59T. This represents more than a 5% increase in the last 24 hours, and more than a 10% increase over the weekend. Increasing difficulty tends to signify network strength, which means price typically follows – this has been consistently true throughout Bitcoin’s history. Because Bitcoin is the largest cryptocurrency, when it rises in price, altcoins usually follow suit. 

The crypto rally hasn’t shown signs of slowing down, though it’s not a certainty the bear market has ended just yet. Les Borsai, chief strategy officer at crypto asset manager Wave Financial, stated that “we might already have hit” the crypto market bottom, and cautioned that while “we could drop further…the macro environment is showing signs of easing and giving way to a possible market reversal.” While a Fed pivot could still trigger one last dip, the improved outlook for 2023 thus far has been a positive sign. If and once a final dip occurs, recovery historically follows. 

While it’s never completely clear where prices may go next, a new year often brings new price action, and 2023 has already lived up to this mantra. Ultimately, top cryptocurrencies tend to recover from drawdowns because their value proposition as decentralized digital money remains intact regardless of market movements. Both crypto traders and long-term investors who are saving for retirement can get more insight into crypto price action on the Bitcoin IRA crypto blog and news page.

A photo of Chris Kline of BitcoinIRA and host Aaron Bry having a conversation on a livestream.

BitcoinIRA Co-Founder Chris Kline Featured on Benzinga TV

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While 2022 may have been the year of surprises in the crypto space, it also paved the way for new beginnings and future developments in the areas of regulation, transparency, and accountability. The emergence of proof of reserves is just one example of how events of the recent past may positively impact the not-so-distant future for this burgeoning and exciting asset class. 

BitcoinIRA CRO and co-founder Chris Kline recently joined Benzinga TV to recap the year and discuss the state of the industry, including the latest Fed rate hike, the possibility of an upcoming recession, and the opportunities 2022 surprises can bring for crypto to build back stronger and better than ever in the new year and beyond. 

To learn about the above and more, be sure to check out the interview. Discussed topics include: 

  • Crypto IRA basics
  • Silver linings in the aftermath of FTX 
  • Benefits of regulation 
  • Tax advantages of crypto IRAs 
  • Bitcoin maximalism 
  • And more 

You can view the interview below. To learn more about BitcoinIRA, how crypto may fit your retirement goals, and the industry in general, check out our blog and knowledge center. 

Gold 2022 figures display with a Bitcoin 0

2022 Crypto Review: The Year of Surprises

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For its many crypto milestones, 2022 may go down in history books as the year of economic shocks, shakeups, and surprises.

After all, 2021 was an incredible year to follow. Top coins such as Bitcoin hit new all-time highs, the crypto market reached a record high above $3 trillion, and NFTs brought Web3 technology into the mainstream.

Crypto Milestones: January – April  

2022 began with the highest inflation rate in forty years likely due to the effects of the global pandemic. Investors responded with the biggest spike in BTC sales since September 2021.

BitcoinIRA announced 60 new cryptocurrencies available to trade for the web and mobile app in February.

Then an unexpected war broke out between Russia and Ukraine. Crypto’s potential as a tool for quick monetary relief came to the forefront in March with Ukraine crypto donations totaling over $130M.

Some of the most recognized global financial institutions embraced BTC. The world’s largest hedge fund invested in BTC. Goldman Sachs launched its first BTC OTC trade in March, followed by Fidelity’s BTC 401(k) announcement in April.

Crypto Milestones: May – August 

BitcoinIRA earned the title of Best Mobile App in May following the first anniversary of its launch.

Then came the TerraUSD and LUNA collapses that pulled down the crypto market and “over $400 billion in value was wiped out.”

Despite the setback, institutional and retail investors alike continued to see the potential of crypto’s revolutionary technology. Traditional finance companies saw executives leave to join crypto projects and a few joined forces to launch their own exchange.

In June, one of BitcoinIRA’s Co-Founders received one of the world’s most prestigious business awards: the EY Entrepreneur of the Year®.

BitcoinIRA also received the Globee® Best in Business Award for Mobile App of the Year in July.

The company continued to attract top-tier talent, adding the former COO of Fidelity Digital Funds to its dynamic team as BitcoinIRA’s new Chief Operations Officer in August.

Crypto Milestones: September – December 

Fidelity doubled down on crypto with the announcement of its first Ethereum Index Fund in October and introduced retail BTC trading for select accounts in November.

Speaking of ETH, Ethereum made crypto history with The Merge, the transition from Proof of Work (PoW) to Proof of Stake (PoS), in September.

Google Cloud announced crypto payments for cloud services in October.

Following the sixth Fed interest rate hike of the year, November brought yet another shock: crypto exchange FTX collapsed.

In December, we close out a year marked with its fair share of setbacks and solutions. Through it all, the crypto community continues to push ahead with the determination to rebuild stronger than ever as Binance’s CEO leads the way with a crypto recovery fund.

Investors continue to modernize their retirement savings with Crypto IRAs, and BitcoinIRA was named a winner in the Executive of the Year for Small Companies category in Best in Biz Awards.

Closing out the year on a high note, BitcoinIRA saw continued growth throughout 2022, surpassing 170,000 users and seeing app installs and usage increase by over 200%.

When the going gets tough in crypto, the tough get going – and they HODL the whole way through.

Stay tuned to the BitcoinIRA news to see what lies in store for 2023!

Let us help you get started with BitcoinIRA, click to get started.