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Bitcoin and the State of Retirement Reports Today

After looking through many studies showing the state of retirement in America today, there seems to be much room for improvement.

The National Institute on Retirement Security came out with some rather concerning statistics in their report released earlier this year, specifically that two-thirds of working millennials have nothing saved for retirement. Meanwhile, according to a Vanguard retirement study, the average account balance of nearly $104,000 was misleading because of a small number of large accounts skewing the average higher, while the median is much lower, at $26,000. And the 18th annual Transamerica Retirement Survey revealed that while 62% of workers are confident that they will be able to retire with a comfortable lifestyle, as many as 56% believe that they have not yet fully recovered financially from the Great Recession and as many as a third expect that they will see a decrease in their standard of living during retirement.

It’s time to expand the retirement savings toolkit and look at additional options, with a focus on portfolio diversification.

Millennials and Retirement: Already Falling Short. From the National Institute on Retirement Security.

Benefits of Portfolio Diversification

Many experts in the financial sector advocate for portfolio diversification as a means of boosting return on investment while also minimizing risk. “For a variety of reasons, people do not understand the value of having a broadly diversified portfolio,” said Barry Ritholtz. “Perhaps they think it shows a lack of corporate loyalty to their employer…But every worker who gets company stock also gets a salary from that same employer. That is a very intense concentration of financial risk. For those workers, diversifying their company stock into broad indexes is a prudent approach.”Furthermore, decentralized assets such as Bitcoin and gold, which are removed from the stock market or any particular currency, act as a hedge against inflation, as well as any political, social, or economic unrest.  And according to research done by Ark Invest and Coinbase, Bitcoin is “the only asset that maintains consistently low correlations with every other asset,” making it a strong choice as an alternative asset in a diversified retirement portfolio.

How Bitcoin IRA Works, the world’s first and largest cryptocurrency platform, allows customers to purchase Bitcoin and other cryptocurrencies for their retirement accounts and store them in a BitGo digital wallet, the leader in multi-signature encryption technology. In 2017 alone, the company processed over $300 million in investments. To learn more about how to diversify your retirement portfolio with Bitcoin or other cryptocurrencies, give one of our IRA specialists a call today at 877-936-7175.


Solar-Paneled Mining: The Future of Bitcoin?

In recent months, the crypto space has gone through a lot of interesting changes and defied expectations.

For starters, the regulatory sector and the decentralized technology sector, once viewed as at odds with each other, have been in fact been working together cooperatively to create a more compliant and transparent financial landscape. This has has been demonstrated by CFTC Chairman J. Cristopher Giancarlo’s “do no harm” approach towards regulating crypto, Nasdaq and Gemini’s SMARTS market surveillance technology partnership, among other announcements.

And, on a separate crypto news front, there’s another unlikely partnership between two sectors that appears to be thriving: the solar industry and the world of bitcoin mining.

William Shatner Works With Solar Alliance to tackle Crypto Mining Sustainability

Solar Alliance, a Canadian solar energy company, announced that it acquired a 165,000 square-foot warehouse in Illinois to build a solar paneled array and rent space to bitcoin miners.

“Blockchain technologies, and cryptocurrencies specifically, are at the cutting edge of a new distributed technology infrastructure,” said actor William Shatner, also a spokesperson for Solar Alliance. “Utilizing solar arrays to power [mining operations] makes social and economic sense.”

The World of Bitcoin Mining Today

New research into energy consumption reveals that, by the end of the year, cryptocurrency could account for 0.5 percent of the world’s energy demand, roughly the same amount consumed by Austria.  For crypto enthusiasts concerned about climate change, the massive energy consumption behind Bitcoin mining has been a difficult concept to reconcile with. However, this recent news from Solar Alliance may indicate that Bitcoin mining, as we know it, will change.

“The acquisition of the Murphysboro warehouse facility and the Memorandum of Understanding (MOU) represent Solar Alliance’s strategic entry into tenanting and supplying low-cost power to the cryptocurrency mining sector,” said Chairman and CEO Jason Bak. “The demand from cryptocurrency mining operations for competitively priced power is immense and we are perfectly positioned to take advantage of that demand.”

A Maturing Crypto Landscape

While 2017 was the year that Bitcoin experienced unprecedented growth, 2018 is shaping up to be the year that the crypto space is officially growing up. While crypto used to be a largely unregulated space, 2018 has focused heavily on crypto compliance, between the SEC’s increased regulation of crypto trading platforms to companies like Chainalysis raising impressive funding to help Bitcoin-based businesses protect themselves against fraud.

In addition to increased regulation, 2018 has also marked a year devoted to deepening understanding around blockchain technology, from the NYCEDC announcing big plans to expand educational efforts in this sector to Facebook launching a new team dedicated to blockchain research.

In my opinion, the advancement in solar-paneled bitcoin mining is another example of progress and maturation in the crypto industry. Just as the regulatory sector is making an extensive effort to weed out the bad actors in the crypto world, solar-paneled mining is addressing the the industry’s inherent environmental concerns. It’s encouraging to see different organizations and sectors tackling crypto’s issues as it scales from an industry with growing pains into an industry all grown up, with an emphasis on being more compliant, transparent, and environmentally conscious than ever before.

How can I invest in Bitcoin Profitably? – Part 2

Bitcoin has surpassed the all-time high this week and now has the undivided attention of investors around the world. With Winklevoss ETF coming up for approval next month, the price speculations are giving a good riff to the cryptocurrency. In the first version of this series of posts, I talked about two major ways to invest in Bitcoin, Long Term and Short Term through direct investments and algorithmic trading respectively. Now that we have considered two major ways to invest in Bitcoin directly, let’s look at a couple of indirect or alternate methods of investment.

Investing in Bitcoin Mining:

While Bitcoin market investments are all about speculation, investing in Bitcoin mining is bound to have assured returns. Though the returns would be small in comparison to what market might have on offer, it would be study and over a period of time, if well aggregated highly profitable. Investing in Bitcoin mining would be investing in the equipment and electricity that would be helping in validating the bitcoin transactions and reaping rewards.

When done in large scale, Bitcoin mining is indeed profitable and provides returns on a consistent basis. Investing in Bitcoin mining can be done by finding a reputable mining group and investing with them would be a good option to get sustained returns through Bitcoin mining.

Investing with Bitcoin based startups:

Well, what is more lucrative than investing in the applications of a disruptive technology that has the potential to change Fintech as we see it!! This is another form of indirect investment depends on the selection of a fertile start up that has the potential to transform existing legacy systems and revolutionize markets as we are seeing today. A vast variety of these startups include Bitcoin transfers, wallets, remittances, proxy credit and debit card payments and instant transfer startups. With more innovation Bitcoin is expected to find applications in advanced IoT involving bots and AI. A financial technology which complements the innovation the future holds.

With measured investments and adoption of bitcoin picking up, these startups would reap good business and you can become a stakeholder of a company that is minting good money. These are the indirect ways to invest in Bitcoin profitably. Follow this space for the next part that would cover about investment methods by directly investing in Bitcoin and also saving tax.

Why People Still Mine Bitcoins

Background on the Halving

“The Halving” describes the 50% reduction in subsidy for Bitcoin miners for every block that is mined and sealed. To simplify, the reward that Bitcoin miners receive for their work is cut in half. “The Halving” occurs every four years, built into Satoshi Nakamoto’s Bitcoin model to control the total output of currency. The first halving of Bitcoin occurred in the early stages of growth for the currency. On July 9th 2016, the second halving of Bitcoin occurred. Since Bitcoin is more established in 2016 than it was in 2012, it may be easier to separate the effects of “The Halving” from the fluctuations of a less mature currency.

Halving’s Impact on Bitcoin mining

To date, Bitcoin has generally avoided drastic effects from the second halving. To the surprise of industry experts, Bitcoin value and hash rate have not noticeably deviated from their previous levels. Most surprisingly, the hash rate, which is a measure of computing power dedicated to mining, has not responded to the change in reward. As a brief overview, Bitcoin miners dedicate computing power to unlocking blocks. Miners are rewarded in Bitcoins for each block they unlock. Logically, since the reward for mining has decreased, it is a puzzle as to why mining levels remain similar to those prior to the halving.

Hash rate chart for past year.  Sourced from Blockchain Info.

Economic Theory

Although the mining levels are initially puzzling, economic theory offers a possible explanation.

I begin with the assumption that prior to the second halving, the Bitcoin market was in equilibrium. In other words, it would not be profitable for new miners to enter the market, since the cost to a new miner would exceed the benefit from mining. This assumption makes rough sense, because it assumes that if opportunity existed, people would take advantage of it.

Miners require a tremendous amount of infrastructure, in particular, computers. These computers are a fixed cost. Once miners have purchased computers, they have a different set of costs to compare with benefits. Fixed costs aside, they consider variable costs. Variable costs are typically related to power usage, operating space, etc. Variable costs alone are less than variable and fixed costs together.


Now consider the second halving. While it may be to expensive to become a miner and create infrastructure, especially given the reduced mining reward, existing mining operations can still function with their Bitcoin rewards exceeding their costs. For readers familiar with first-mover advantage (cite Wikipedia), this describes the explanation of hash rate levels. This phenomenon is common to industries with high fixed costs to entry.

Accordingly, it makes sense that the hash rate will remain constant, or decrease, as Bitcoin subsidy reduces every four years, holding other factors constant. People with mining operations will continue to mine at current levels, until the operational costs exceed benefits.

If other factors change, this could impact the hash rate. If costs, fixed or variable, are reduced, the hash rate could increase. For instance, if the cost of purchasing computing power decreases, the hash rate could increase, since miners would be motivated to create new infrastructure. If the variable costs, such as power, increase, this could reduce hash rate as costs outweigh benefits.

Images from Blockchain Info and Prelounge.