Why Do Cryptocurrencies Have Value?In order to pinpoint how cryptocurrencies gain value, we should first take a look at why cryptocurrencies have any value in the first place. As you know, fiat currencies have value because they are sanctioned by state authorities that guarantee their purchasing power. Basically, a currency has value because you can exchange it to purchase goods and services. On the other hand, stocks and securities have value because they represent the goods and services that are available for purchase on the market. Company stocks, for example, gain value because there is a demand for the products produced by the company. Cryptocurrencies are a relatively new asset class that occupies the middle ground between regular currencies and stocks. They are not currencies in the regular sense of the term, because the purchasing power of a cryptocurrency is not guaranteed by any authority. They are also different from stocks because there may not necessarily be a product or service behind the cryptocurrency. For example Bitcoin, the most valuable cryptocurrency in the market, doesn’t represent anything but itself. It is an asset that has value because people think it is valuable. Of course, there are thousands of cryptocurrencies in the market with different specifics so it is hard to extrapolate why cryptocurrencies gain value in general. But it is possible to make sense of why certain digital currencies gain value whereas some others are considered less valuable than penny stocks if we take into account the most basic and foundational principle underlying most modern economies: supply and demand.
What Fuels the Demand for Cryptocurrencies?In order to understand what fuels the demand for cryptocurrencies, let’s look at two of the biggest and most developed cryptocurrencies on the market: Bitcoin and Ethereum. Bitcoin and Ethereum are good examples because they are two very different types of cryptocurrency..
Why Is Bitcoin Valuable?Bitcoin is generally considered an asset that is akin to currencies or gold because it is considered to have both exchange value and store of value. That means that Bitcoin can be used to purchase goods and services around the globe, but it is also considered an investment that keeps its value over a long period of time without being affected by economic ups and downs that can wreck the traditional asset markets, much like gold. In other words, Bitcoin gains value because people and institutions think the digital asset is - and will continue to be - valuable as a medium of exchange and as a store of value. That is mainly because Bitcoin has characteristics that make it useful and also valuable. Bitcoin is the first and the largest cryptocurrency, which means its network is wide enough to withstand hacks that threaten other smaller cryptocurrencies. It provides instant and fast value transfers across the globe that make it tremendously useful in a world where sending money across borders can be an economic and bureaucratic nightmare. In other words, Bitcoin has value because it emerged as an original solution to a widespread problem. Other altcoins with similar characteristics and goals as Bitcoin, on the other hand, struggle to gain as much value as Bitcoin because they are in competition with the original. Any one of these cryptocurrencies can beat Bitcoin to the top, if and when they provide better alternatives to it. In addition, there is a limited supply of Bitcoin. There will only ever be 21 million Bitcoins, so as demand increases, the value of each Bitcoin rises.
Why Is Ethereum Valuable?Ethereum represents another variety of cryptocurrencies because Ethereum has a different promise than Bitcoin. Whereas Bitcoin is considered as an exchange and storage method for value, Ethereum is a platform for different services. Ethereum introduced smart contracts, the concept of executing automatic and direct transactions between parties without an intermediary, giving start to a flourishing DeFi industry. In other words, people think Ethereum is valuable because it offers a product that is valuable. It is another unique solution that opens new avenues for growth. While Bitcoin and Ethereum have different mechanisms, goals, and products, they both have something in common: these cryptocurrencies offer value to the world because they establish new ways of making things happen. They are innovative. They promise usefulness and they back it up with strong development teams and clear plans for the future, even though their roadmaps differ a lot due to their unique visions for the future. At the moment, these cryptocurrencies constitute the blueprint for many other crypto projects that try to follow in their footsteps, and luckily for us, they also provide a blueprint for us to understand why and how other cryptocurrencies gain (or lose) value.
How Does Demand Factor In?For any cryptocurrency to gain value, there has to be a demand for that cryptocurrency. In the previous section, we explored how Bitcoin and Ethereum create such demand by offering unique methods to overcome the restraints of our current financial systems. But while vision and usefulness are the most fundamental components for a cryptocurrency to gain value, there are also other factors that play into cryptocurrency valuation. One of the most important aspects of valuation is information. There can be no demand for a product or a cryptocurrency if the public doesn’t have the necessary information regarding the value a cryptocurrency promises. That is why educational materials and marketing play a very important role in cryptocurrency valuation. News about the cryptocurrency industry, including news about crypto hacks, new regulations, crypto-related crimes and new business partnerships between cryptocurrency projects and established companies have a direct effect on cryptocurrency valuation, i.e. the value of cryptocurrencies. When companies like PayPal, Twitter or Tesla embrace cryptocurrencies, they signal institutional trust in these assets, increasing the reach of digital coins and increasing their value. In short, cryptocurrencies gain value based on both general and specific considerations related to the crypto industry as well as the specific cryptocurrency. Crypto-related news, opinions of prominent figures and industry leaders, and regulations on cryptocurrencies set the broader trends regarding crypto valuation, but each specific cryptocurrency gains value based on its own real or perceived merit. While some cryptocurrencies create demand by providing unique services and products, others take advantage of hypes and other marketing tactics to promote themselves and their value.
A Few Words Before You Go...Investing in cryptocurrencies can be risky mainly because the cryptocurrency ecosystem is still in its infancy in many ways. There are many valid cryptocurrency projects that offer valuable products, but there are also numerous others that take advantage of the FOMO mentality to create artificial demand, which can result in great economic loss for many people. Learning about cryptocurrencies with an open mind while keeping a critical outlook is a must when it comes to crypto investments. If you are interested in cryptocurrencies, we invite you to contact our Coin IRA specialists who can help you make informed decisions about crypto ownership and investments so that you can sail ahead without worrying about scams and missed opportunities
The Technology of CryptocurrencyOne of the main reasons there are so many cryptocurrencies is because of the puzzle that Bitcoin left to the world after the infamous Satoshi Nakamoto dropped the blockchain bombshell in 2008. With the onset of Bitcoin came the introduction of blockchain technology to the world. While Bitcoin was controversial due to its ties to the dark web and anonymous payment concerns, the real value was in the trustless system that worked in the backend. All blockchains are limited by three main factors – scalability, security, and decentralization. Blockchain service offerings have made incremental progress in these areas over the years, but the tech is still in its infancy. The existence of these limitations has been stimulating developers in the industry to create their own blockchains, each offering varying degrees of advantages over others. The limited throughput of the Bitcoin network led to the development of Ethereum, whose limitations, in turn, have led to the development of other blockchains like EOS, TON and others. This new digital currency offered a way for ordinary people to conduct transactions outside of any third-party regulation. It showed how efficient a transaction could be, in addition to inventing a new mode of recording these transactions and improving privacy and security. The concept of “trustless transactions” was completely new to our way of dealing with the world. It used technology as a way to ensure that two parties can exchange value without relying on trust alone in a genuinely intriguing manner (see description of blockchain here). This technology, however, is complex and not easy to master. This is why so many cryptocurrencies have been developed - because they believe they are adopting the proper approach and methodology to this intricate future tech.
The Market FactorAnother important factor that has led to the increase in the number of blockchain cryptocurrencies is human nature, which was encouraged by entrepreneurship and the search for profit by market demand. The law of supply and demand governs the crypto market like any other, so when Bitcoin made its first major debut in late 2017, people rushed to start buying the new asset in order to try their hand at this mysterious new technology. Many of these people understood the basics of Wall Street assets and applied the same methodology, while others saw more utility and wanted to bring real value to the world (such as Ethereum’s Vitalik Buterin). Satoshi knew that the technology itself was still not fully developed - which is actually one of the main reasons many people speculate that he released it. Blockchain and the concept of worldwide digital assets is a deep, complex, and nuanced problem. It requires new and creative approaches. It needs to go through the gauntlet of capitalism in order for the most powerful, scalable, and efficient version to be created.
Proving Their WorthCryptocurrencies, while relatively volatile, are an important progression for humankind. The advent of smart contract technology along with the Internet of Things (IoT) is poised to revolutionize every industry on the planet ranging from logistics to banking. It has the capability to help developing nations more easily develop their GDP while also helping us to better track and optimize our resources. The sheer number of cryptocurrencies is a natural byproduct of this new, exciting development in society. Many of these projects, unfortunately, exist just to make money off of the space. But, importantly, many of them exist to help contribute to pushing the science of digital currency forward. Ethereum is pioneering smart contracts; Grayscale is helping to establish trust in the space, and Coinbase was even listed on NASDAQ this year! With that being said, don’t let the massive number of cryptocurrencies fool you. Cryptocurrencies are a serious asset class, and the large number of digital assets that are available is simply a byproduct of the space fleshing itself out and finding its place in our fast-moving and rigid technological world.
Ready to invest in Crypto?If you are ready to invest in cryptocurrency, look no further than our cryptocurrency specialists at Coin IRA. They can help both newcomers and more adept participants in crypto learn more about how cryptocurrency can add value to long-term retirement plans. Buying, selling, trading, and storing Bitcoin and other cryptocurrencies inside a Crypto IRA is safe and easy with the help of Coin IRA’s experts.
Major Companies and Retailers that Accept Bitcoin
OverstockOverstock is the first major US retailer that started accepting Bitcoin. Overstock is an online market where you can find everything you need for your home, from furniture to clothing, jewelry, and pet supplies. Overstock invested in blockchain technology early on, blazing the trail for many other stores that would follow its footsteps to a cryptocurrency retail revolution.
PayPalIt’s only natural that the internet's favorite payment processor company, PayPal, joined the crypto-sphere, considering it has always been one step ahead of the competition when it comes to digital payments. PayPal allows US customers to make payments with Bitcoin, Bitcoin Cash, Litecoin, and Ethereum. PayPal provides an advantage to business owners as well, since it offers lower cryptocurrency transaction fees than the fees credit card companies charge.
VenmoOur favourite social payment app now supports digital currency purchases! Following in the footsteps of its parent company PayPal, Venmo rolled out a crypto program earlier this year, in collaboration with the trading service provider Paxos. All verified US users can buy Bitcoin, Bitcoin Cash, Litecoin and Ethereum with the Venmo App. Venmo credit card users also have the chance to use their cash backs to buy crypto without paying any transaction fees. The program is being rolled out gradually, so don’t worry if you haven’t seen the option on your app yet!
BitPayBitPay is a payment processing company that facilitates payments with Bitcoin. You can buy gift cards with BTC for several companies on the BitPay website, including Amazon. BitPay also has its own cryptocurrency wallet and offers a BitPay prepaid MastercCard. You can connect BitPay Mastercard to your BitPay crypto wallet and convert your Bitcoin funds to USD to load the prepaid card and spend your funds on anything you want to!anywhere that accepts MasterCard.
American Red CrossThe American Red Cross is a non-profit organization that provides disaster relief and emergency aid during natural and man-made disasters such as hurricanes, accidents, and explosions. You can donate Bitcoin to the American Red Cross through BitPay, one of the biggest cryptocurrency payment services in the world. BitPay also facilitates payments with Ethereum, Bitcoin Cash, and a few other altcoins.
NeweggInternational electronics supplier Newegg is one of the first companies that started accepting Bitcoin and other digital currencies as payment. As the American Red Cross, Newegg uses the BitPay infrastructure to accept Bitcoin payments. While you can’t use BitPay for subscription orders or pre-orders, pretty much everything else is available. Just keep in mind that all sales through BitPay are final. You can read about its terms and conditions here.
NordstromFlexaThe Gemini-supported Flexa app allows cryptocurrency users to spend their Bitcoins on more than 40,000 locations across the US. Users can download the Flexa app from Google Play or Apple Store and integrate their cryptocurrency funds to Flexa’s wallet in order to make purchases simply by scanning QR codes on their mobile phones. Whole Foods did a test run on the app, and you can use digital currencies to shop from Nordstrom and Dunkin Donuts. You can download the Flexa app to see the full list of locations where you can spend your Bitcoins.
EtsyThe independent trading platform Etsy allows sellers to accept cryptocurrency payments if they wish to do so. If you see that your favorite handcrafts store allows “other” payment methods, there is a chance that they accept Bitcoin payments too. Message the seller to inquire whether they accept digital currencies and they can easily provide you with a Bitcoin address.
RakutenRakuten launched its own cryptocurrency payment service in 2021. Rakuten customers in Japan can trade Bitcoin, Ethereum, and Bitcoin Cash for Rakuten Cash without paying fees, and use their Rakuten points to shop for online and offline services throughout Japan. Previously, Rakuten charged 300 Yens on bank transfers.
AirBalticAirBaltic Airlines started accepting Bitcoin for their services back in 2014 and they are still going strong. The airline offers cheap flights across Europe and the Middle East. You can buy flight tickets from AirBaltic with your Bitcoin through BitPay.
ExpressVPNExpressVPN is a popular virtual private network service that ensures your online privacy. It is also one of the rare subscription services that accept Bitcoin as payment. ExpressVPN accepts Bitcoin for yearly subscriptions. You can get a 12-month plan that comes down to an average of $8.32 per month. Payments can be made through BitPay.
WikipediaWe can’t praise the world’s largest open-source encyclopedia enough, but those who really appreciate this free resource can support it by making Bitcoin donations! Wikimedia Foundation, the parent company that runs the free encyclopedia accepts Bitcoin donations through BitPay.
GyftGyft is a digital gift card platform that accepts Bitcoin. You can buy gift cards from over 200 retailers with Bitcoin through the platform, including Target, Starbucks, and Whole Foods. Gyft doesn’t charge additional fees for Bitcoin payments.
AMCAMC entertainment owns the world's largest movie theater chain. The AMC CEO, Adam Aron, has announced plans for accepting Bitcoin payments for movie tickets. AMC’s US theatres are expected to start accepting Bitcoin towards the end of 2021.
Amazon Gift CardsWhile Amazon itself doesn’t accept Bitcoin, you can still use BTC to buy Amazon gift cards at Purse.io. Purse is a marketplace that meets Bitcoin owners with gift card sellers. The platform has a handy search engine that allows you to search for any Amazon product, or better yet, allows you to copy the product link directly to the search bar.
WalmartFinally, Walmart recently posted a job opening on its website back in August, seeking to hire a blockchain expert responsible for developing a cryptocurrency project for the US based retail giant. The position will be responsible for planning ‘crypto-related investment and partnerships,’ opportunities for Walmart. The official posting is now closed, presumably because they already hired the expert they are looking for! We think a cryptocurrency future for Walmart might be on the horizon very soon.
Here’s an important tipIf you are looking for a specific product to buy with your cryptocurrency, or if you are merely curious about whether your favorite brands are available to buy with Bitcoin, check out the spendabit search engine to discover the wealth of available options for spending your BTC.
A Few Words Before You Go…New ways of incorporating blockchain and digital currencies into retail structures are emerging every day, encouraging retailers to consider accepting Bitcoin as the technological infrastructure evolves and the public demand increases. The numbers are already growing and we will make sure to update you when that happens. Hopefully, now you have a better understanding of where you can use Bitcoin as a digital payment method. There are thousands of online and offline retailers around the world that accept these payments and the numbers are growing every day. If you want to learn more about Bitcoin and how it can change the way you handle your finances, get in touch with our Coin IRA crypto specialists who can help you put together a cryptocurrency portfolio.
Saving and investing are as old as the capital markets. They have existed in different forms since man learned how to trade. Whether for a house, kid’s college, a new car, general comfort, or even a weekend party, financial planning is a crucial part of our financial lives. How well we execute our savings and investment plans are the backbones to sustainable living and a happy future.
Introduced in the United States in 1974, Individual Retirement Accounts (IRAs) are tax-advantaged accounts you can use to save and invest for retirement. IRAs are provided by Internal Revenue Service (IRS) approved financial institutions, including brokerage firms, mutual advisors, mutual funds, and banks. They include a wide range of options, limitations, dividends, and penalties depending on the type of IRA or action performed within or outside the specified period.
Understanding IRAs and How They work
In planning for your retirement, you’re very likely to be familiar with or come across retirement plans with different names. For example, IRAs specifically refer to Individual Retirement Accounts that aren’t tied to an employer; you establish these types of accounts yourself with the help of a financial institution of your choosing acting as custodian or trustee. On the contrary, 401(k) plans are employer-sponsored plans offered by for-profit companies that you would open through your employer, and 403(b) plans are U.S. tax-advantaged retirement savings plan available for public education organizations, some non-profit employers, cooperative hospital service organizations, and self-employed ministers in the United States
Types of IRAs
No matter your income level, you should always keep your retirement plan in mind when making your current financial decisions. Obviously, an earner with higher income usually has more disposable income, and can take full advantage of the funding options, but anyone can contribute any amount up to the allowable limit. Let’s take a look at four main types of IRA and how they work.
Traditional IRAs: Contributions to a Traditional IRA defer income tax on the amounts you contribute until they are distributed to you after age 59 ½. The IRS sets the allowable annual contribution limits based on your age. Contributions are usually tax-deductible (consult your tax preparer) and withdrawals will result in a 1099 at the end of the year in which you took the distribution. You’ll then claim that income on your tax return for that tax year.
Roth IRAs: In Roth IRAs, contributions are made with after-tax dollars, and if left in the IRA for the requisite time period, withdrawals after retirement are tax-free. Eligibility to contribute is based on your income level (consult your tax preparer), and contribution limits are the same as for a Traditional IRA.
Simplified Employee Pension (SEP) IRAs: SEP IRAs are typically used by small business owners, freelancers, and entrepreneurs to make retirement contributions for themselves and their employees. SEPs have higher contribution limits and other requirements that make it necessary for you to consult your tax professional before moving forward.
Simple IRAs: In a Simple IRA, employees make direct contributions, and employers are required to make a matching contribution for the employee.
Cryptocurrency IRAs: The astronomic rise of Bitcoin and cryptocurrencies during the past couple of months has been ascribed to many variables. From institutional investor acceptance and investment, rapid digitization, mainstream acceptance, and even the pandemic, one thing is certain — the Bitcoin revolution is no longer a Generation Z or Millennial euphoria. It has transcended age groups. By outperforming stocks, bonds, and the most traditional asset classes like gold and oil, cryptocurrencies have continued to break and set new all-time highs in 2021.
Of course, the aim of having an IRA is to plan for the future by saving and investing in the best interest-yielding reserve assets. Historically, stocks, bonds, annuities, and mutual funds have been the go-to assets. However, with many more people now favoring Bitcoin as a reserve asset, digital assets are increasingly popular in retirement accounts. Cryptocurrency IRAs are self-directed IRAs that allow individuals to invest in cryptocurrencies inside their retirement portfolios.
Are Cryptocurrencies IRAs Legal?
In 2014, the IRS classified cryptocurrencies as property, qualifying them for IRAs.
Choosing a Cryptocurrency IRA
Some people are skeptical about a Bitcoin investment because of its perceived volatility. However, there are two questions you should be asking: First, is the rapid adoption of cryptocurrencies by the biggest companies in the world a coincidence? And second, how much scrutiny would a sizeable company do before investing in this new digital asset class?
Choosing a Cryptocurrency IRA is a decision that requires proper research, education, and some degree of familiarity with the asset. However, its never too late to start planning for your future, and you can start now. Before trusting a Crypto IRA provider with your retirement funds, here are a few questions you might need to ask yourself and the IRA provider:
- Does the Crypto IRA provider have experience and a strong reputation?
- Do they provide excellent customer service?
- Do they provide expert assistance with the transfer from my existing retirement account?
- Can they answer all my questions to my satisfaction?
- Can I quickly trade in or out of a crypto investment?
- How secure is the crypto stored inside my IRA?
Coin IRA is one of the pioneering companies in the United States offering Cryptocurrency IRAs.
There are many advantages to working with Coin IRA, but primarily is the wealth of experience they bring to each and every customer and the professional relationships they have established that customers benefit from – from reputable custodians to the top cryptocurrency exchanges. The Coin IRA website offers users and potential customers key information about cryptocurrencies, setting up an IRA account, and proactive customer support to answer questions and guide you through the process.
Coin IRA allows you to fund your IRA from an existing 401(k), Traditional, Roth IRA, SEP or Simple IRA, or to establish a custodial non-IRA account. With Coin IRA, cryptocurrency assets are securely locked away in military-grade cold wallets, protecting your digital assets from malicious attacks or loss.
Ultimately, Coin IRA saves you time, stress, and money by offering you an expert-assisted self-directed Cryptocurrency IRA, guiding you each step of the way. Coin IRA has built genuine trust with partners and account holders over the years. Visit coinira.com today to find out more!
It has been almost 15 years now since the inception of cryptocurrencies from the Bitcoin revolution back in 2008. Since then, the crypto space has gone through a roller coaster ride of regulatory issues, price fluctuations, and new innovations. Throughout this time, though, many institutions have begun to catch on to the underlying value that these digital currencies bring to the table.
This value comes from the revolutionary innovations that blockchain created. While many people are focused on the different cryptocurrency investment options and trading possibilities, the real driver of value has always been the underlying blockchain technology. Leading institutions such as Goldman Sachs and other major financial players are now all-in on cryptocurrencies and blockchain technology, with one representative stating “We’ve crossed the line now…because of the underlying technology that’s coming.”
In order to understand why cryptocurrencies are here to stay, it is important to understand the basics of this underlying tech:
Blockchain and Decentralization
Bitcoin’s value stems from the overall bias of society that desires to keep strangers away from their personal data and assets. Currently, banks operate under a single, centralized ledger that is owned and operated under a single corporation, governed by a small group of individuals. As you can tell, this requires some serious trust in these strangers.
In 2008, the weakness in this approach was laid bare for all to see, and the housing market crash ruined the United States’ economy. If you haven’t learned about how this occurred, the flaw was trusting small groups of people and individuals to verify transactions and ensure they were able to be executed. Houses were bought with money that didn’t exist, and the homeowners could not afford their monthly payments. With this happening consistently, the market was bound to snap – and it did.
After this crisis, Bitcoin brought with it the concept of “trustless” transactions, among other innovations. This simply means that there is no trust involved in a bitcoin transaction, as the exchange of value is stored, publicly visible, and verified by multiple parties with an incentive to ensure its proper verification. Therefore, blockchain enables two “untrusting” parties to engage in a transaction without the need for a moderator. Additionally, it distributes the control of the system to the entire community, removing centralized power structures and essentially creating the “decentralized” system it has become known for.
Mass Adoption Is Happening
As you can see, blockchain has the ability to radically reform the way in which our society handles and approaches money. At its core, it provides the rails for which many current fintech innovations are able to operate at their highest level – digital wallets, DeFi exchanges, encrypted data, smart contracts, etc. These tools all have the ability to comprehensively modernize supply chains across the world in industries such as logistics, finance, healthcare, investing, real estate, and much more.
Huge corporations have been actively researching this technology, and recently, have begun serious efforts to implement blockchain into their current infrastructure. According to a 2021 survey conducted by the Bank of International Settlements, 86% of central banks are actively researching the potential for CBDCs, or central bank digital currencies. This includes Sweden’s Riksbank, The Bank of Canada, and even the European Central Bank.
The cracks in our current infrastructure have been exposed, and many big players are realizing that this technology is going to be a part of our future for a long time to come. Cryptocurrencies are here to stay, and they are only going to continue to gain mass adoption as an investment asset as the underlying technology continues to revolutionize the world we live in.
If you are ready to invest in the asset class of the future, you can reach out to a cryptocurrency specialist at Coin IRA to learn more about how you can add cryptocurrency to your long-term retirement plan. Buying, selling, trading, and storing Bitcoin and other cryptocurrencies inside your IRA is safe and easy with the help of Coin IRA’s experts.
Cryptocurrencies make a great investment but just like stocks and bonds, they are subject to capital gains tax. However, if you invest in the cryptocurrency inside a Cryptocurrency IRA, and depending on whether you establish a Traditional or Roth IRA, your tax liability is limited to income tax, not capital gains.
There is no question that cryptocurrencies have been booming in 2021, with their overall market valuation now over $2.3 trillion. That's a nearly three-fold increase from a market that was worth less than $800 billion at the end of 2020. A similar boom occurred back in 2017, and while the market suffered a mild retraction afterward, it was soon back in the green.
Large rallies such as these are often criticized for their sharp corrections, but in the long-term, prices have been shown to enjoy exponential growth. In fact, over the past ten years, Bitcoin has been proven to be more profitable than any other investment on the market. For this reason, cryptocurrencies like Bitcoin look set to make great long-term investments, particularly as a retirement hedge against deflationary fiat currencies.
Death and Taxes
When speaking of retirement investments, one can't help but think of Benjamin Franklin's famous quote: "Nothing is certain but death and taxes". That’s certainly applicable to both cryptocurrency and almost all retirement plans, as both are subject to taxation.
Back in 2014, the IRS officially declared that Bitcoin and certain similar digital assets would be deemed property, and therefore subject to capital gains tax. This gives the government the right to claim a percentage of any profits made through cryptocurrency investing, just as it would with stocks and bonds.
Fortunately, the same rule also deems that you can reduce these taxes by investing in cryptocurrencies using a self-directed IRA, and either defer the taxes until distributions from the IRA are taken, or in the case of a Roth IRA, potentially eliminate taxes on gains entirely. This can be done in a number of different ways, each providing significant tax benefits which we will discuss here.
Taxes on Cryptocurrency
Reducing or eliminating the amount of income tax you have to pay on your cryptocurrency investments is the key advantage of using a Cryptocurrency IRA. Many new investors in the cryptocurrency space are unaware of the amount of capital gains tax they have to pay on their investments, and often get caught out at year-end for not properly reporting their profits.
If you intend to hold your crypto investments for a long time in order to maximize profits, then a cryptocurrency IRA is the ideal way to reduce your tax overhead. In addition to the handsome tax savings, you aren't required to report any individual transactions made within your IRA, eliminating the need to keep detailed records of your investment activity.
With the tax deferral benefits of a Traditional Cryptocurrency IRA, you can maximize the profits you make by deferring the distributions from the IRA until you are no longer working, and earning substantial income, when you most likely would then be in a lower tax bracket. Having your cryptocurrency inside your IRA also helps you to avoid panic selling or spending on frivolous purchases, although buying and selling cryptocurrency inside your IRA can be accomplished quickly with a simple phone call.
Cryptocurrency IRA Taxes
With a self-directed Cryptocurrency IRA, you can choose either a Traditional IRA or a Roth IRA. These are the two most common types of IRAs, and they each offer significantly different tax benefits.
In short, with a Traditional IRA, you make investments with pre-tax dollars but pay income tax when you take distributions. If you wait until you are at least 59 1/2, you will avoid the penalties associated with early withdrawals. With a Roth IRA, you contribute after-tax dollars and are not taxed on the growth provided the Roth IRA is held for the required period of time (talk to your tax professional about that). Depending on your investment strategy, these options offer different advantages.
As long as you are working and earning income, you can contribute to your Traditional, Roth, SEP or SIMPLE IRA. The IRS sets the amount you are eligible to contribute annually each year. For a Traditional or Roth IRA, the amount of your eligible annual contribution is based on your age. For 2021, if you are under age 50, you can contribute $6,000 annually, and $7,000 annually if you are 50 or older. You can also rollover funds from an existing qualified plan, or transfer funds from an existing IRA, without limit. SEP and SIMPLE IRAs have different rules and contribution limits, so it would be a good idea to talk to your tax professional if you are interested in these more complex options. In any event, you can truly capitalize on the early growth of cryptocurrencies by getting started as soon as possible, and ultimately mitigate the tax liability by utilizing a Cryptocurrency IRA, generational wealth is entirely possible by investing now and investing wisely.
Another one of the key reasons that some investors choose a Cryptocurrency IRA is diversification. While traditional stocks and bonds may seem like safer options, they typically offer relatively conservative returns compared to cryptocurrencies. If you look at the investment portfolios of some of the world's most famous investors, you'll see that they always rely on diversification to ensure they have an equal balance of risk and safety. This requires keeping a large percentage of funds in a low-risk fund while also taking advantage of riskier investments that offer potentially higher returns.
By diversifying a portion of your existing retirement fund into a Cryptocurrency IRA, you can take advantage of Bitcoin or other crypto's spectacular returns while keeping the majority of your investment in a less volatile environment. Additionally, new evidence suggests the cryptocurrency market is becoming less correlated to traditional stocks, offering a potential safe haven in the event of a financial crisis.
Reduce Your Taxes Today with a Cryptocurrency IRA
Investing in cryptocurrency has proven to be a highly profitable choice for thousands of companies and individuals around the world. When investing through a safe financial product like an IRA, you not only receive beneficial exposure to the price gains but also the security of a well-trusted and licensed custodian.
Coin IRA provides an easy method of investing in cryptocurrency via an IRA. You can do this in several ways: by rolling over all or part of an existing 401(k) into a Cryptocurrency IRA; transferring all or part from an existing IRA into a Cryptocurrency IRA; or making your allowable annual contributions to your Cryptocurrency IRA.
What Are the Benefits of a Cryptocurrency IRA Account?By investing in a Cryptocurrency IRA with a reputable company, you enable the best protection of your investment, as well as having experts on board to ensure tax efficiency under IRS rules. The cryptocurrency in the IRA will be stored safely in a best-in-class, hybrid, multi-signature digital wallet with military-grade encryption. Rest assured you will not need to master all of Bitcoin's intricacies to get started in the same way it is not necessary to know how to fix your car's engine to obtain the benefits of personal transportation. The Crypto IRA experts at Coin IRA will take care of that. What is important to know is that the backbone of cryptocurrencies is the blockchain, which is a ledger or "Decentralized Ledger Technology" (DLT) that is validated by many computers in a peer-to-peer network, making it very robust and tamper-proof, and leaving the confines of banks as "trusted third parties" behind. Long-term investors, retirement investors, passive investors, and early adopters of new technology, whether young or old, can benefit from their investing a part of their retirement into cryptocurrency. Here are just a few great reasons:
6 Reasons to Invest in a Crypto IRA
Diversification of your investment portfolio
Return on Investment
Hedge against inflation and financial turmoil
Privacy and Security
Disengagement from the conventional financial system