How to invest in Bitcoin with Bitcoin IRA

Investing in Bitcoin with a Bitcoin IRA allows you to put a piece of the original cryptocurrency into your retirement portfolio with tax-saving benefits and 24/7 trading. By understanding more about Bitcoin, investors are better armed with the knowledge to make choices and trade within their crypto IRAs.

What is Bitcoin?

Bitcoin (BTC) is the grandfather of all cryptocurrencies. It was created by someone that mysteriously called themselves Satoshi Nakamoto in 2009—almost 20 years after blockchain timestamping was first presented as a research project. BTC is the first decentralized currency in which the need for trusted third-party verification has been removed.

There is a famous story about a BTC miner that used 10,000 BTC to buy $30 worth of pizza in 2010. Which, even at the discounted price today, would be worth about $200 million. All in all, BTC is the most trusted and well-known cryptocurrency available on the market today.

Key Concepts of Bitcoin

• Decentralization – To transact in Bitcoin, the transaction is sent out to the BTC network, which means everyone in the network. If the majority decides it is a valid transaction, the transaction will be approved and recorded on the blockchain. The critical piece here is that rather than a single bank or other entity, the transaction’s validity is approved by numerous parties, reducing the risk of centralized manipulation. Most cryptocurrencies have been designed to operate in this manner.
• Scarcity – A limited amount of BTC will ever be created. Thinking about fiat like the US Dollar, fiat is produced through debt. Every time someone borrows money, new dollars are created, which can happen endlessly. One problem with this model is that it is in constant devaluation—meaning that there is no end to inflation, and the currency could eventually fail. Because there is a limited amount of BTC, its value will always depend on supply and demand, not the amount of money you can manage to loan people. This system can be more robust and could prevent systemic economic collapses and the end of currency systems.
• Immutable Ledger – Every transaction is recorded in a block on the blockchain. Once a transaction is approved and recorded, it cannot be changed without altering the entire blockchain. This makes all transactions and records very transparent; in other words, you can’t cook the books on blockchain transactions to hide money laundering, theft, and other white-collar financial crimes.
• Minable – People supporting the BTC network have the opportunity to make money in different ways. Two common ways to generate income with Bitcoin include mining or transacting the coin. First, you can mine for new Bitcoin; projections show that this will be a viable task until all of the BTC is mined sometime around 2140. Second, you can make BTC by facilitating transactions and collecting their associated fees.

Bitcoin vs. Ethereum

Despite Ethereum’s (ETH) utility, BTC has remained more popular and retained a higher market cap or value than ETH. Ethereum is also a blockchain-based cryptocurrency, though the primary difference is that the blockchain is constructed a bit differently.

The ETH blockchain can support smart contracts and uses staking protocols that generally require less electricity to mine and transact. Its ability to support smart contracts allows developers to build projects off the back of the ETH blockchain, which has led to the proliferation of decentralized finance (DeFi). ETH is trusted similarly to BTC, but its exposure to the wild west of DeFi could put the cryptocurrency at risk. Therefore, tracking BTC fundamentals, sentiment, and price fluctuations can be much easier than ETH.