Category: Digital Gold

What Is A Roth IRA For Cryptocurrency?

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A Roth individual retirement account (IRA) enables investments in cryptocurrencies for retirement. In addition to offering tax advantages,  having a portion of your retirement portfolio in crypto provides diversification. 

The decentralized aspect of cryptocurrencies has made the asset class attractive to investors wanting to de-risk  away from central authorities controlling their assets. Certain cryptocurrencies have provided investors with tremendous returns, and outperformed competing asset classes and speculative instruments.

Investors can benefit from including crypto in their retirement savings. To do so, it is important to examine several aspects of a Roth IRA cryptocurrency account to increase the possibility of achieving a comfortable retirement.

How a Roth IRA for Cryptocurrency Works

A Roth IRA for cryptocurrencies functions similarly to a Traditional IRA (but with key differences). You can roll over your Traditional IRA into a crypto Roth IRA and make monetary investments into cryptocurrencies, as opposed to equities or other asset classes.

While you cannot directly contribute cryptocurrency to this account, you are entitled to the tax advantages offered by a crypto Roth IRA account.

A Roth IRA requires investors to contribute after-tax dollars to then enjoy tax-free growth. The eventual distributions in retirement are also typically tax-free. A Traditional IRA, conversely, requires pretax contributions, also offers tax-deferred growth, but taxes are instead owed at the time of retirement

A Roth IRA enables you to hold funds in the account for the duration of your life. 

Can You Hold Cryptocurrency in a Roth IRA?

To invest in cryptocurrencies for retirement, you will need a self-directed IRA, which can include a Roth IRA, to experience its benefits.

Using a platform that allows retirement investments in cryptocurrencies, such as BitcoinIRA, is required.

Advantages of Opening a Roth IRA for Cryptocurrency

Having crypto in a Roth IRA allows you to enjoy certain benefits that may not be available in other retirement accounts.

Tax Benefits

Investing in a Roth IRA for cryptocurrency requires you to make after-tax contributions. The advantage, however, is enjoying earnings that may grow tax-free for the life of the account.. In other words, you don’t pay capital gains taxes on the crypto in your Roth IRA.

After age 59½, you may be able to  withdraw the contributions and earnings without paying taxes or penalties if you’ve owned the account for at least five years. 

It’s also possible to qualify for additional tax credits such as the Retirement Savings Contribution Credit, but eligibility depends on your adjusted gross income and contributions.

Growth Potential 

One of the primary allures of investing in cryptocurrencies are the returns. Bitcoin and other popular cryptos have provided significant returns within relatively short timeframes. 

The S&P 500 index has provided average annual returns of 10%, whereas Bitcoin has surged several hundreds of percent during bull market rallies, sometimes lasting months. 

A Traditional IRA requires you to take distributions starting at the age of 73, but a Roth IRA doesn’t have a required minimum distribution rule.

Investment Diversification

Diversification helps investors offset profitable assets against the ones that have lost value. Cryptocurrencies tend to have an inverse relationship with the dollar. When the dollar’s value decreases, cryptocurrencies rise.

The value of cryptocurrencies usually increases at a higher rate than the dollar’s value during bull runs. The returns gained on cryptocurrencies when offset against the dollar’s losses can result in significant profits, rather than merely a balanced account, especially in terms of purchasing power.

What to Know Before Opening a Roth IRA for Cryptocurrency

You should consider several factors before opening a Roth IRA for cryptocurrency to ensure that it aligns with your investment goals.

Contribution Limits

For the 2023 fiscal year, your contributions to a cryptocurrency IRA account cannot exceed $6,500 if you’re younger than 50. A $7,500 limit applies to individuals older than 50.

Investment Risk

Cryptocurrency prices are highly volatile. Although these assets can provide high returns, some cryptos have lost more than 90% of their value during a crash or bear market.

Unrealized profits do not grow retirement accounts, so it’s important  to monitor the performance of your assets and lock-in profits when the value of your cryptos appreciates.

Develop a Strategy

Not all cryptocurrencies provide returns, and some are riskier than others. It’s important to research cryptocurrencies to understand their performance history, tokenomics, and capabilities. 

Doing so will provide perspective on the risk level of each asset and help you decide when to buy and for how long to remain invested before taking profits.

Choose the Right Platform

A sound investing strategy can be realized only if used on the right platform. Your assets should be secure, and the platform should provide you with 24/7 access to your account. Before you begin to invest, the ideal platform will provide a plethora of information about crypto retirement investing and its product offerings. You should scrutinize the platform’s fees, ensuring they’re reasonable and unhidden, such as the service that BitcoinIRA offers.

Optimize Your Retirement Savings in a Crypto Roth IRA

A crypto Roth IRA enables you to add cryptocurrencies to your retirement savings and benefit from the tax advantages. Various benefits are available for this investment strategy, but you should also consider the risks and contribution limits.

The likelihood of a comfortable retirement is increased by investing with the right platform, and having a sound strategy that involves thorough research of how cryptocurrencies have performed.

FAQ

Can you set up a Roth IRA for cryptocurrency?

Yes, you can set up a self-directed Roth IRA that will enable you to invest in cryptocurrencies.

How can you avoid paying taxes on a Roth IRA for cryptocurrency?

Contributions made to a Roth IRA for cryptocurrency comprise after-tax dollars. Investors don’t pay capital gains taxes on crypto earnings in this account, and distributions taken at retirement age may also be tax-free.

How do you convert cryptocurrency holdings to a Roth IRA?

You cannot contribute cryptocurrencies directly into a Roth IRA.

Should You Invest in Bitcoin for Retirement?

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As the convergence between the physical and digital world continues, more cryptocurrencies and other types of digital assets are emerging. Bitcoin is at the forefront of this movement as the first cryptocurrency of its kind, and the established gold standard within the cryptocurrency space. 

The following discussion will examine the value behind Bitcoin and discuss the risks and rewards associated with investing in Bitcoin for retirement.

Reasons to Invest in Bitcoin for Retirement

Bitcoin can be considered a speculative commodity and store of value, with a value proposition based on it being a perfectly scarce, immutable, portable, and divisible savings technology.

Bitcoin’s purpose extends far beyond simply being a digital currency. It’s also the first major decentralized digital currency. In recent years, Bitcoin has also gained traction as a viable medium of exchange, as more and more businesses are accepting Bitcoin as payment.

Below are three core reasons why you should consider Bitcoin  for your retirement portfolio.

Growth potential

Bitcoin is one of the best-performing assets of the 21st century – boasting an average return of 1,576% and a total return of 18,912% from 2010 to 2021. 

Although Bitcoin is not immune to the risks associated with investing, its historical growth has been nothing short of extraordinary. Bitcoin’s growth has single-handedly spearheaded the growth of the entire cryptocurrency industry; for this reason, all other cryptocurrencies are collectively referred to as altcoins. 

Cathie Wood, the fund manager of ARK Investment Management (ARK), predicts that Bitcoin’s price could exceed $1 million by 2030.This target is based on the assumption that Bitcoin will increase significantly during the next several years. 

Overall, while the future growth of Bitcoin is not guaranteed, it has tremendous upside potential. Historically, Bitcoin has climbed in value after every halving cycle. If the cryptocurrency industry continues to develop, regulation improves and mainstream adoption picks up steam, there is little reason why Bitcoin — the flagship of the cryptocurrency space — would stop growing in value. The ever-rising mining hashrate, representing investment in the network, also has a history of pulling price up with it over time.

Diversification

Portfolio diversification is a universal investment principle and pivotal for optimizing the risk-to-reward ratio of a retirement portfolio. Diversification refers to the practice of spreading your investments around so that your exposure to any one type of asset is limited. 

Historically, portfolios with Bitcoin achieve higher returns than those without the currency. 

Here are some core reasons why Bitcoin is great for diversification:

  • Bitcoin’s nature makes it a great hedge against inflation and seigniorage.
  • Bitcoin’s dominant market position and first-mover advantage provide a conservative way for investors to gain exposure to the cryptocurrency industry.
  • Bitcoin’s high risk-reward profile allows investors to benefit from tremendous upside potential without having to allocate a large portfolio percentage  to BTC.

Tax advantages

Bitcoin is referred to as a convertible virtual currency because it has an equivalent value in terms of fiat currency. The exchange or sale of a convertible virtual currency — including its use to pay for goods and services — has tax implications. But there are a few ways you can reduce your tax burden by investing in Bitcoin through a tax-advantaged retirement plan, such as a BitcoinIRA (which can also hold other cryptocurrencies).

Investing in a Bitcoin IRA alleviates the tax burden experienced by an investor. In essence, you will not be taxed as long as the Bitcoin is held in your account. This allows you to not only achieve tremendous savings, but also enables compounding growth of the value generally lost to taxes. 

Potential Risks of Investing in Bitcoin for Retirement

Despite the lucrative nature of Bitcoin, it is important to address a few key risks of investing in Bitcoin for retirement. Investing in Bitcoin does not guarantee success,  and sound principles of investing are required regardless of the asset class.

A few possible risks of investing in Bitcoin are as follows:

Volatility

Bitcoin –— alongside the rest of the cryptocurrency market –— can be volatile, often fluctuating by large amounts within a short period of time. This is because the price movement of Bitcoin is largely dependent on investor sentiment and market emotion. 

While volatility may not be bad from a risk-reward standpoint, it’s important to take steps to mitigate your risk and understand your personal investment risk levels. 

Less liquidity

Retirement savings are designed for the long haul. This means that you need to be willing to let your capital sit and not sell during local highs and lows. Given the inherently volatile nature of Bitcoin, this can be difficult for some investors. 

Uncertainties 

A key caveat to investing in Bitcoin is regulatory uncertainty. It is still unclear the impact future regulations may have , and whether Bitcoin will flourish under new regulatory conditions. 

While Bitcoin is currently the world’s largest cryptocurrency, the rise of competing cryptocurrencies could affect Bitcoin’s growth potential. The most notable threat to Bitcoin’s future growth is Ethereum, the second-largest cryptocurrency by market capitalization. Unlike Bitcoin, the Ethereum blockchain enables developers to create and launch decentralized applications (DApps);  it is also faster than Bitcoin, utilizing newer technology.

Lastly, Bitcoin’s growing energy footprint may be another cause of concern. Bitcoin operates under a consensus mechanism referred to as proof-of-work, which necessitates the use of electricity consumption to power and secure the blockchain. While the footprint remains modest on a global scale, it is still less environmentally friendly than proof-of-stake blockchain systems.

Keys to Investing in Bitcoin For Retirement

Any investment has its potential advantages and risks, and Bitcoin is no different. There are a few key best practices when it comes to investing in Bitcoin for retirement. 

First and foremost, it is essential to evaluate your own risk tolerance. Are you an aggressive investor, risk-averse, or somewhere in between? Deciding how much risk you are comfortable with is the first step in determining how you allocate Bitcoin across your portfolio. 

Another best practice is to consider diversifying your exposure to cryptocurrency by investing in a few other market leaders such as Ethereum. This will ensure that your exposure to any one type of cryptocurrency is limited. Cryptocurrency retirement account platforms like BitcoinIRA offer access to a wide variety of different cryptos, ensuring the ability to diversify as much as you’d like. 

How to Invest in Bitcoin For Retirement

There are several ways to invest in Bitcoin for retirement. A few of these methods include:

Cryptocurrency IRA

Bitcoin individual retirement accounts (IRAs) are one way to invest in Bitcoin for retirement. The traditional crypto IRA reaps major tax advantages for investors, possibly enabling the deferment of taxes owed until retirement age As long as you invest steadily, you may be able to realize significant savings. Investors may also choose a crypto Roth IRA, which like the Traditional IRA does not accrue capital gains tax. The Roth IRA requires you to contribute your net or after-tax income, so you typically won’t pay tax on distributions taken at retirement age.

Cryptocurrency 401(k)

A notable advantage of a cryptocurrency 401(k) is tax savings. The 401(k) has features built into it enabling participants to pay less tax than they would on retail and other investments. Bitcoin held or traded in a 401(k) account will accrue zero capital gains tax. 

SEP and SIMPLE IRA

Simplified Employee Pension Plan (SEP) and Savings Incentive Match Plan for Employees (SIMPLE) IRAs are employee sponsored, tax advantaged plans. Employers can establish new crypto accounts for these plans, and employees can transfer existing accounts to crypto accounts.

Is Bitcoin a Good Investment?

Overall, investing in Bitcoin offers a lot of growth potential and can be a great way to diversify your retirement portfolio. You can create an account to invest in Bitcoin for retirement by visiting BitcoinIRA. 

Frequently Asked Questions

Can I invest my 401(k) in Bitcoin?

Yes, you can typically transfer your 401(k) savings to a Bitcoin-based retirement plan, such as BitcoinIRA, which is a self-directed digital IRA. 

Should I put my life savings into Bitcoin?

It may not be wise to invest your life savings in Bitcoin. This is because Bitcoin is a high-risk investment. However, a healthy allocation could prove lucrative, depending on your risk tolerance.

How much of my retirement should be in Bitcoin?

The amount of Bitcoin invested into a retirement depends on the risk tolerance and financial goals of a given investor.

Bitcoin displayed over a piece of gold rock

Bitcoin vs. Gold: How the Two Assets Compare

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Bitcoin’s volatile nature has provided investors with significant returns, and its growing popularity has prompted many to reconfigure their portfolios to include the predominant digital asset. Furthermore, some investors have argued that it is more lucrative to invest in Bitcoin than gold.

This way of thinking has sparked widespread debate to determine which asset is a superior store of value. Regardless of which asset investors prefer, Bitcoin and gold function, at their core, as currencies. Bitcoin’s peer-to-peer technology facilitates payments, and gold has throughout history been traded for goods and services.

While gold has been used as money for centuries, Bitcoin is often hailed as digital gold. Which asset comes out on top? In this article we’ll compare Bitcoin and gold as investments, exploring use cases, benefits, regulation, and the information investors need to make informed decisions about which asset aligns with their investment goals.

Understanding Bitcoin

Bitcoin is the first decentralized, blockchain-based digital currency, and was launched in January 2009. It operates on, and is the native asset of, the Bitcoin network, facilitating peer-to-peer transactions. Bitcoin’s unique features include a maximum circulating supply of 21 million coins and transactions verified by miners (and subsequently immutably confirmed), who solve complex mathematical problems to bring new coins into circulation.

The coin’s decentralized nature means that no institution or centralized entity controls it, nor can such groups interfere with its transactions. In other words, there is nothing to prevent willing parties from transacting, peer-to-peer, unobstructed.

Bitcoin’s volatility is one of its key attributes, historically enabling significant upside for investors. Its price action has resulted in dynamic bull runs, with investors earning returns of more than 1,000%, sometimes within several weeks. Bitcoin’s massive price spikes can be followed by crashes. It’s common for Bitcoin to lose up to 85% of its value during a bear market.

The expanding adoption of Bitcoin can be largely attributed to its accessibility. Investors can buy Bitcoin from major exchanges around the world from the comfort of their homes. Considering its infancy, Bitcoin is still largely unregulated in some, countries and is not yet allowed in others.  

Understanding Gold

Gold has functioned as currency for thousands of years, and was initially used to create jewelry and idols. Ancient Greeks used gold as money, exchangeable for goods and services. During World War II, developed economies relinquished gold’s role as a currency used daily to pay for goods and services.

The Gold Standard was a system that pegged the value of a country’s currency to a specified amount of redeemable gold. In 1971, the U.S. abandoned the Gold Standard, no longer converting dollars into gold at a fixed value.

In the present day, gold is used to make ornamental objects and wedding rings, and is also held as money (in the form of property or as an asset). Gold is considered a store of value, and many investors hold it in their retirement accounts as a hedge against inflation. 

Gold’s bull runs usually occur during economic downturns, and can last several years. While its price crashes aren’t typically as rapid as Bitcoin’s, gold has at times lost 80% of its value in a multi-year bear market. The exact gold supply is uncertain, but it is believed that nearly 209,000 tonnes of gold have been mined.

The trading of gold is regulated by federal agencies.    

Bitcoin vs. Gold: Inflation Hedge

Gold has proven during several inflationary periods that it can act as a hedge. Although gold’s value can increase during inflation, its returns are modest compared to Bitcoin’s rallies. Many investors bought Bitcoin in 2020 when the U.S. government printed trillions of dollars.

Those investors forecasted inflation, and the overwhelming demand resulted in Bitcoin rising in value by 1,400% until November 2021, reaching its all-time high of almost $69,000.

Gold’s value began increasing at the start of the global economic crisis in 2008. It provided investors with just over 158% returns from October 2008 to August 2011. Despite the strong run, gold’s current price is only marginally beyond its 2011 top. 

Bitcoin vs. Gold: Investment

Bitcoin’s short-term price action can be highly volatile, with price movements of 20% or more within days. As a long-term investment, Bitcoin has provided investors with returns of more than 1,000%. Bitcoin’s bull runs occurred in 2013, 2017, and 2021. Investors who bought Bitcoin in 2013 and held it until 2021 received 500,000% returns.

Gold’s price action is more stable than Bitcoin’s. Although gold can lose 80% of its value, its crashes take several years to reach the bottom. Gold’s short-term price action is usually stable, with percentage movements in the single digits. As a long-term investment, gold appreciated 639% from January 2001 until August 2020.

Investors can include Bitcoin and gold as part of their retirement investment in a 401(k) or an individual retirement account (IRA). 

Bitcoin vs. Gold: Accessibility 

Bitcoin is more accessible than gold in most countries due to its nature as a digital asset. Even if Bitcoin isn’t offered in a particular country, investors can gain access online buying from an exchange based anywhere in the world.

Since gold is a physical asset, investors looking to take possession of it will need to collect it or have it delivered. That poses a security risk, and may involve hefty fees for transportation. 

Bitcoin vs. Gold: Utility 

Gold has, throughout its long history, taken more forms than Bitcoin. It is used in jewelry, technology, and even aerospace engineering. Gold also has a track record of being used as money, while Bitcoin was more recently  designed as a currency and store of value. Many, however, see Bitcoin as more of a speculative asset.

Despite this, Bitcoin’s adoption as a payment method has grown significantly over time, with corporations such as Tesla, Microsoft, and Burger King accepting it for various transactions. It has also experienced strong adoption in some nations, and was officially deemed legal tender in El Salvador.

Bitcoin vs. Gold: Regulation

Gold is regulated by federal agencies. The U.S. Securities and Exchange Commission (SEC) only regulates gold investments such as gold exchange-traded funds (ETFs) and gold stocks, but not bullion trading.

Bitcoin’s regulation is still in its infancy. Despite the relative newness of the regulatory environment, there have been some strides toward stringent frameworks, such as New York’s BitLicense.

Bitcoin vs. Gold: Store of Value

Bitcoin’s high volatility means that short-term holding can result in losses. However, being a store of value, Bitcoin has thus far always recovered and reached a new all-time high over several years of holding.

Gold has less short-term volatility than Bitcoin. It also provides returns when held long-term, but gold’s returns are lower than Bitcoin’s during a 10-year period. As with any investment, risk and reward must be carefully considered.

Which is the Better Investment, Bitcoin or Gold?

Choosing between investing in Bitcoin or gold depends on the investor’s risk appetite and investment goals. Bitcoin’s returns since 2009 overwhelmingly exceed those of gold. 

On the other hand, gold has been around far longer, suggesting that it may be less risky to hold. However, transporting gold is inconvenient and can be costly. 

To decide which investment is preferred, investors should compare each asset’s features and benefits to their investment goals. The asset that best aligns with one’s goals is, typically, the most suitable investment. It also never hurts to diversify.

Frequently Asked Questions 

Which is more valuable, gold or cryptocurrency?

Bitcoin’s returns for the past 10 years have exceeded those of gold. 

Is it better to buy gold or Bitcoin?

Buying gold or Bitcoin depends on each investor’s goals and risk appetite. You should determine which asset aligns with your investment objectives the most.

Why is Bitcoin more valuable than gold?

Bitcoin’s long-term returns exceed gold’s returns over the same period. However, gold has been around for longer, and brings real-world utility. Bitcoin has attracted more attention than most assets since its inception due to unprecedented performance. 

Where can I buy Bitcoin and gold?

You can invest in Bitcoin, gold, or tokenized PAX Gold within a retirement account at BitcoinIRA. Gold is also available through GoldClub Direct and Digital Trust.

Press Release: Bitcoin IRA Adds Digital Gold To Its Self-Trading Retirement Platform

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LOS ANGELES, Feb. 13, 2019 /PRNewswire/ — BitcoinIRA.com, the world’s first and largest digital asset IRA company that allows customers to purchase cryptocurrencies and other digital assets for their retirement accounts, has announced it is adding Digital Gold (DG) to its platform. Digital Gold is the first-of-its-kind to be offered in a retirement setting and it is eligible for purchase today on its proprietary self-trading IRA platform.

Digital Gold is an innovative, proprietary solution that allows customers to instantly buy and sell investment-grade, pure physical gold 24/7. Digital Gold combines the stability of gold with the speed of ETFs, and customers have 100 percent direct ownership of their physical gold. The product is the most cost-effective physical gold IRA asset now available on the market because it removes the large markups and transaction costs found with traditional gold sellers.

Customers always maintain the title to their real gold through a cryptographically-secure blockchain database that investors can utilize to verify ownership. Their physical gold is securely stored in the vaults of the Royal Canadian Mint and is fully deliverable upon request at any time. The product is insured, cost-effective and has a fully transparent, 24/7 settlement process.

BitcoinIRA.com’s Digital Gold is developed in a strategic alliance with Dillon Gage Metals, one of the world’s largest precious metals wholesale firms and leading technology innovator in the industry.

Mark Furmanek, chief operating officer at Dillon Gage Metals said, “I am excited to provide strategic support to BitcoinIRA.com‘s newest product, our 40 years of experience in physical precious metals and our investment into technology has the making of a strong alliance.”

BitcoinIRA.com’s COO and co-founder Chris Kline added, “We are proud to expand our product offering with the launch of Digital Gold and to have Dillon Gage Metals as our strategic provider. Before this innovation gold buyers had to choose between dollar-derived proxy ETF certificates or slow, expensive physical gold. We are disrupting the industry by offering the best of both products and making them tradeable 24/7 on our propriety IRA platform.”

Digital Gold joins 8 other digital assets available on BitcoinIRA.com’s platform including Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Litecoin (LTC), Bitcoin Cash (BCH), Ethereum Classic (ETC), Stellar Lumens (XLM) and Zcash (ZEC).

Consumers can self-trade Digital Gold and cryptocurrencies inside the BitcoinIRA.com platform today by visiting bitcoinira.com/digital-gold.

About BitcoinIRA.com

BitcoinIRA.com is the world’s largest and most secure technology company that allows customers to purchase cryptocurrencies and other digital assets for their retirement accounts. The company offers full-service and self-service options which include setting up a qualified digital asset IRA account, rolling over funds from an existing IRA custodian, executing a live trade on a leading exchange and then moving funds into an industry-leading multi-signature digital wallet.

Since 2016, BitcoinIRA.com has processed over $300 million in investments, gained nearly 5,000 customers and received more than 400 5-star customer reviews. The company has been featured extensively in the media, with coverage in Forbes magazine, CNBC, and The Wall Street Journal, among other publications.

BitcoinIRA.com is a fintech service provider and as such is not a financial adviser, cryptocurrency, exchange, custodian, wallet provider, initial coin offering (ICO), or money transmitter. BitcoinIRA.com is privately funded and based in Los Angeles.

Learn more about BitcoinIRA.com at https://bitcoinira.com or call 877-936-7175.

About Dillon Gage Metals

Dillon Gage Inc. of Dallas (DillonGage.com), founded in 1976, companies include:

Dillon Gage Metals (www.DillonGage.com), one of the world’s largest precious metals wholesale trading firms. The firm is an authorized purchaser for all major world mints and maintains inventory in over 20 countries around the world. Additionally, the company provides advanced tools and technologies that enable market participants to be more successful in their businesses, allowing electronic trading and offering cloud-based solutions for the physical precious metals marketplace. 800-375-4653

FizTrade Online Trading (www.FizTrade.com) offers a real-time bid/ask trading platform for gold, silver, platinum and palladium. 800-375-4653.

Dillon Gage Refining (www.dillongage.com/refining/why-dg), professional assayers and refiners of precious metal scrap, from low grade to karat scrap. Stone removal services and diamond experts on staff. 888-436-3489.

CONTACT: Mike Schrobo, [email protected]

SOURCE Bitcoin IRA

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