Wallet with Bitcoin tokens

Virtual Wallets and Cryptocurrency Investments

The 21st century has been remarkable for the rapid advancements in information technology, and consequently, it is fulfilling the dream of a digitized world. The novel coronavirus outbreak and the lockdown restrictions have been an eye-opener to the need for digitization and virtual interactions. Of course, money and value exchange are at the heart of human interactions and certainly aren't left out of this revolution. From automated teller machines (ATMs), mobile banking, electronic transfers, digital currencies, and now virtual wallets, banking has been rapidly digitized worldwide.

What Are Virtual Wallets?

A virtual or digital wallet is essentially a broad term that mainly refers to a smartphone, desktop, or notebook compatible application that helps store credit card information, send, receive and save money, and overall performs banking services through secure wallet passcodes or pins. Digital wallets have been around for about two decades; however, the popularization of smartphones in the past decade was mostly responsible for the tremendous global usage surge. Before 2008, virtual wallets were restricted to fiat (paper) currencies; however, after the Wall Street financial crisis in 2008, an anonymous author, Satoshi Nakamoto, published the Bitcoin whitepaper, a path that ultimately unleashed cryptocurrencies.

Types of Virtual Wallets

Today, virtual wallets can be broadly classified into fiat and cryptocurrency wallets.

Fiat Virtual Wallets

Fiat virtual wallets allow users to send, receive, save and conduct a wide range of transactions using fiat currencies only. Fiat currencies are government-issued currencies and are regulated by the central banks; they include the US dollars (USD), Euros (EUR), Japanese Yen (JPY), basically any country’s currency that comes to mind. There are thousands of Fiat wallets, and the notable fiat virtual wallets include Paypal, Cashapp, Walmart Pay, Apple Pay, Transferwise, and Wirex.  In October 2020, one of the largest fiat virtual wallet merchants, Paypal, announced plans to enable users to hold, sell or buy cryptocurrencies in their wallets starting from January 2021. This decision is not surprising considering the massive surge in crypto; expectedly, other fiat virtual wallets would consider adding crypto wallets to their portfolio.

Cryptocurrency Wallets

In the past decade, Bitcoin and cryptocurrencies' growth has been incredible and mostly unpredicted. From that insane idea of decentralizing money transfer and conducting money transfer on a peer-to-peer basis, cryptocurrencies have grown from not just another means of money transfer but also a store of value as well. Bitcoin is steadily growing to become more popular than gold or crude oil as people seek to insulate themselves from failing economies globally. So what is a cryptocurrency wallet? As you may have probably guessed, a cryptocurrency wallet is a virtual wallet that allows users to hold, buy or sell cryptocurrencies. However, unlike traditional fiat wallets, cryptocurrency wallets are decentralized, hence, much more sophisticated. Crypto wallets have these two main features. Cryptocurrency wallet address: A cryptocurrency wallet address is a string of alphanumeric characters (25-35 characters long) that uniquely identify different wallets. If you’re familiar with PayPal, a wallet address is much more like an email address used by different users to send and receive money. Private key: A private key is a unique identification that grants you access to your wallet. Much more like the key to a safety deposit box, a private key allows users to open their wallets, send, or receive a cryptocurrency. Private keys take many forms, usually a set of cryptographically generated alphanumeric characters, and they can be stored or kept in various means.

Types of Cryptocurrency Wallets

There are two broad places where you can keep your crypto; a hot wallet and a hard wallet. Hot Wallets Essentially, the difference between hot and cold wallets is that hot wallets are connected to the internet. Hot wallets are free and are by far the most common type of wallets, and they can conduct basic transactions as swiftly as possible. Cold/Hard Wallets Cold wallets, though less used, are much more secure wallets for storing Bitcoins and other cryptocurrencies. A cold wallet keeps the user's wallet address and private key away from the internet, making them insulated from any potential internet hack or critical theft.

Securing a Cryptocurrency Wallet

Investing in Bitcoin has been on the rise in the past couple of months, with institutional investors like Grayscale, Microstrategy, and Tesla diving into Bitcoin investment. It's certainly no surprise to see Bitcoin rise from a 2020 low of $3,850 to $50,000 in less than a year. While the underlying blockchain technology itself is a tightly secure and immutable ledger that is theoretically impossible to hack, fraudsters and hackers have occasionally found a way to attack exchanges and private wallets to steal cryptocurrencies. Phishing scams, 51% attacks, key theft, and Sybil attacks are notable routes of attacks over the years. So how can you secure your crypto wallet? Here are a few ways to insulate yourself from fraudsters. Two-factor authentication (2FA): You may already be familiar with a two-factor authentication concept. If you're not, it's pretty simple; 2FA is an additional layer of wallet security that requires users to provide a one-time password (OTP) before accessing or sending cryptocurrencies on the wallet. The OTP is usually a four or six-digit number sent to your registered mobile number, email address, or both. Hard wallets: As explained earlier, a hot wallet is quick and free; however, hard wallets protect you from online private key thefts. Trezor hardware wallets are by far the most common types of hard wallets, and they allow you to securely keep your private key, wallet address, and a wide range of cryptocurrencies away from the internet.

Make Your Crypto Decisions with Coin IRA

At this point, you probably have a few questions on crypto investment; What coin is the best? Which wallet should I use? How safe is Bitcoin investment?  Should my retirement plan involve crypto? Chances are all your questions won't be answered in a five-minute read or the tons of unfiltered information on the internet. Coin IRA is leading the charge for Cryptocurrency IRAs, especially if you're looking to diversify from traditional financial assets like stocks and bonds into cryptocurrency. Coin IRA has established relationships with pioneers in the cryptocurrency markets and reputable IRA consultants to bring cryptocurrency investment plans to a wide range of users. With Coin IRA, your investments are managed by some of the most brilliant minds in the cryptocurrency markets, and you can leverage strong market momentums without any stress. Coin IRA guarantees secure storage of all crypto investments with various partnerships with the industry's security leaders to protect your hard-earned assets. Making investment decisions are a crucial part of an enjoyable future; hence, the need for IRAs. In a world that is rapidly drifting towards digitization, if you’re looking into cryptocurrencies, Coin IRA has your answers.
Digital currency metal litecoin coin on the gold bitcoins.

Litecoin vs. Bitcoin: Is Litecoin the “Silver” to Bitcoin’s “Gold”?

The fact that there are over 4,000 cryptocurrencies out there is a clear indicator of the rapid growth of the crypto market. Admittedly, a great number of the newly-released coins decay as fast as they appear, leaving no significant mark behind. However, some of them have managed to cope with early-stage challenges and gain a firm position in market-cap charts. Still, all successful altcoin stories seem to be perceived in reference to Bitcoin (BTC). It’s quite understandable, as Bitcoin’s features and behavior provided the basis for the initial development of the entire blockchain industry. One of those successful examples is Litecoin (LTC). It was launched in 2011, only two years after BTC. In this article, we’ll focus on the similarities and differences of BTC and LTC from several aspects. Before we set off, note that this isn’t a competitive comparison, as Litecoin wasn’t invented with the purpose of dethroning Bitcoin. On the contrary, with improved accessibility and transaction speed, Litecoin aims at enhancing Bitcoins’ effort for a more natural environment as a value reserve. Let’s examine the way they do this. 

The Histories of Bitcoin and Litecoin

The idea of decentralized finance was actualized in the late 1990s, but it wasn’t until 2009 when the pseudonymous author (or team) of Satoshi Nakamoto introduced this new concept to the public by sharing the link to the whitepaper Bitcoin: A Peer-to-Peer Electronic Cash System Bitcoin was the first cryptocurrency traded without an intermediary to control asset flow and transactions. According to the creator(s), the invention of Bitcoin resulted from the need for “an electronic payment system based on cryptographic proof instead of trust”. Despite the hardships Bitcoin has faced - including sharp price fluctuations, cyberattacks, and public hesitation - it turned into a significant global, financial phenomenon of the 21st century.  Litecoin, on the other hand, was launched in 2011, by a former Google employee named Charlie Lee, who saw great potential in the blockchain industry. The new cryptocurrency was created with the clear vision of complementing the new promising concept of an anonymous and trustless financial system. It openly supported Bitcoin’s key objective by improving the blockchain network’s integrity. That being said, Litecoin offered a faster and technically improved version of Bitcoin, which was making its way towards mainstream recognition.  However, it wasn’t an easy road for Litecoin either. The system experienced serious network issues and it seems that trust from the community wasn’t fully secured until 2013, following the release of the Litecoin. Litecoin has kept its position among the top ten ranked cryptocurrencies in terms of trading volume and market cap in the past several years.

Similarities Between Litecoin and Bitcoin

In addition to a shared vision, quite a few similarities between Bitcoin and Litecoin are observable at first sight. The way they complement each other is compared to gold and silver.

Proof of Work System (PoW)

Both Litecoin and Bitcoin operate on a proof-of-work model as a secure method to prevent double-spends. In a nutshell, this system stands for a method by which altcoins are acquired through mining. It includes generating, authenticating, and adding the cryptocurrency to the blockchain ledger. Litecoin and Bitcoin’s PoWs systems aren’t identical, but they do share the fundamental features.

Transactions and Storage

According to users, the Litecoin transaction execution reminds them of what they’ve already experienced on the Bitcoin blockchain. Both cryptocurrencies can be purchased on a crypto exchange platform or rig-mined. Furthermore, both require a digital or hardware wallet to ensure the safe storage of users’ funds before and after the transaction process. We can also note that both Litecoin and Bitcoin have gone through critical price volatility caused by the general public demand. This has also created the need for applying local finance and anti-money laundering regulations.

Differences Between Litecoin and Bitcoin

Similarities between Litecoin and Bitcoin are mainly what we consider to be core operating principles. The list of differences between these cryptocurrencies is slightly longer.

Market Capitalization

The most distinctive dissimilarity between Litecoin and Bitcoin lies in their market cap, which indicates the asset’s value on the market based on the number of outstanding coins multiplied by the current coin price. As of the early months of 2021, Bitcoin’s value has been $1 trillion, which is incomparably higher than the Litecoin value of $13.7 billion. There are several factors contributing to this huge price gap. The time factor is perhaps the most obvious one, but it’s not the main reason why Bitcoin has been superior concerning market cap figures even to the second-largest cryptocurrency Ethereum, whose market cap has been estimated at $475 billion. It’s the role of Bitcoin as a cryptocurrency leader that has generated such a far-fetched cap record score.

Total Supply

Another distinguishing point of utmost importance is the total number of assets that each coin can produce. The Bitcoin system is designed not to exceed the number of 21 million “pieces” of Bitcoin, whereas the total supply of Litecoin can go up to 84 million. This may appear as a point for Litecoin due to the psychological perception of buying whole units for a lower price.  However, it doesn’t really mean much in real-life trading since both Bitcoin and Litecoin can be divided into smaller units. Bitcoin’s “cents” are known as satoshis, the lowest fraction to which Bitcoin can be “broken into”. One Satoshi equals one-hundredth millionth of a Bitcoin. Litecoin applies the same math, but its smallest units are called Litoshi. 


Even though both networks deliver real-time transactions, transaction speed was one of the imperatives in the creation of Litecoin, so it outperforms Bitcoin in the time required for transaction confirmation by the counterpart participant. In numbers, the average confirmation time of Bitcoin is nine minutes per transaction. This includes all courses of action during which the code is verified and recorded on the blockchain, for which Litecoin requires only 2.5 minutes.  The transaction speed factor is undeniably advantageous for the overall image of Litecoin, but it’s not the deciding one when choosing your potential asset for investment. 


What was described above as a general similarity between Bitcoin and Litecoin regarding the PoW system does in fact contain certain differences on a more technical level. To begin with, Bitcoin and Litecoin use different cryptographic algorithms. The former employs the traditional SHA-256, while the latter employs a relatively new Skrypt algorithm. This affects the mining process since, in both Bitcoin and Litecoin, the process of acquiring coins by mining requires a great amount of computing power.  As of 2021, the mining reward on Bitcoin’s blockchain is 6.25 BTC. They appear every ten minutes and secure the predictive character of Bitcoin’s supply by automatically adjusting the difficulty of the SHA-256 equations. Litecoin applies Skrypt, a memory-intensive hashing algorithm that was created with the purpose of deterring ASICs and GPUs, making the Litecoin network accessible to personal users, which is the target audience of Litecoin. In the beginning, all users were allowed to mine LTC with their CPUs, but now there are Skrypt-compatible ASICs as well.

A Few Words Before You Go...

We hope that we conveyed the main points you should consider when comparing the features of LTC against BTC. Litecoin is a complement to Bitcoin rather than a direct competitor on the market. Therefore, it’s impossible to pick a winner or imply in any respect as to which one is better investment material. Litecoin tends to be a more practical medium of exchange while Bitcoin has turned out to be a well-established store of value. The choice depends on your personal trading preferences and your purpose as a potential crypto investor. If this article managed to spike your interest in the prospects of crypto investments, contact our experienced Coin IRA team. They’ll help you decide on the best crypto path for your individual preferences and needs.
Cryptocurrency - Word cloud sign.

Making Sense of Cryptocurrency Terms

Cryptocurrency has a rich vocabulary to say the least. The slang, jargon, and acronyms associated with crypto trading can boggle the mind. If you’ve ever spent time puzzling over a blog post or trying to decipher a Twitter feed about cryptocurrency, then you already know how frustrating crypto terms can be. And unfortunately, all of the unfamiliar lingo can make some investors nervous. That’s understandable. It’s hard to know how to proceed as an investor when you’re not sure you comprehend the language being used. In point of fact, though, there is nothing magical or mysterious about cryptocurrency. It’s surprisingly easy to understand once you learn some of the common phrases used in the field. This article will demystify some of the more common cryptocurrency terms that get tossed around in connection with the digital asset.

Basic Crypto Terminology, Decoded

What is a node? What is a hard fork? Here are some of the most common crypto terms associated with the blockchain and the currency itself. Altcoin: A cryptocurrency other than Bitcoin. Bitcoin, which first appeared in 2009, is the oldest and best-known form of virtual currency. Other, newer cryptocurrencies, like Litecoin and Ethereum, are known as altcoins. There are thousands of altcoins currently on the market. Blockchain: An immutable digital ledger containing a full record of all of the transactions that have been carried out using a given cryptocurrency. The data on the blockchain is stored in a series of blocks of a fixed size. A blockchain functions like a huge, encrypted database. Because it is decentralized, there is no one master copy of the blockchain for hackers to target. Faucet: an app or website that hands out cryptocurrencies to users in return for carrying out simple tasks, like watching advertisements or completing quizzes. The goal of the faucet is to increase public interest in cryptocurrencies by distributing digital currency. Fiat: Currency issued by a government. The US dollar is an example of fiat currency; so is the Euro, the British pound, and the Japanese Yen. Fork: a fork occurs when a blockchain changes the protocol that it uses to verify transactions. This can happen in the (unusual) event of a blockchain being hacked. It can also happen when users have a major disagreement about verification protocols. There are two distinct types of fork.
  • hard fork (or hardfork) will impact the entire blockchain, making previously invalid transactions valid, and making previously valid transactions invalid. A hard fork necessitates a complete, top-to-tail upgrade of the whole blockchain so that the system can stay up and running.
  • soft fork is backward-compatible. The existing nodes will still be able to recognize new transactions as valid and will not need to be upgraded. However, the current miners will need to shift to the new protocol in order for the soft fork to work.
Gas fees: A unit of measurement used on the Ethereum network. “Gas” refers to the amount of computational energy needed in order to carry out each individual transaction. Halving: also known as a “halvening,” an event that occurs approximately every four years which halves the amount of Bitcoin that is created every day. Halvings are a key feature of Bitcoin’s scarcity model and are thought to drive up the cryptocurrency’s value. The next halving will take place in April 2024. Hash rate: Measures the speed at which a blockchain (like Bitcoin or Ethereum) is able to both mine currency and verify transactions. Mining: the process of solving complex mathematical problems (with the help of powerful computers) in order to verify transactions on the blockchain. In return for successfully verifying transactions, the “miner” is given a certain allotment of cryptocurrency. Node: A computer connected to a blockchain. Because the blockchain is decentralized, it essentially consists of a network of nodes, which share access to information on transactions and other data stored on the network. Sharding: A means of breaking up the blockchain ledger so that it is more easily managed by each node. Sharding becomes essential as blockchains grow too large to be carried by most computers. Stablecoin (or stable coin): A class of cryptocurrency that is pegged to a fiat currency or to a commodity, like gold. Stablecoins may be secured by a fiat currency, a commodity, or another cryptocurrency. As the name suggests, stablecoins lack the volatility of most cryptocurrencies. Token: A digital “coin” issued by a given cryptocurrency. Each cryptocurrency has its own tokens, which can be used to trade for other tokens or to buy goods and services online. Tokens are virtual; some sites do sell physical coins, but they have no value as currency. Wallet: A virtual location that investors use to store their virtual currency. A wallet contains a private key, also known as a seed, which allows investors to buy, sell, and trade cryptocurrencies. There are several kinds of wallets.
  • software wallet is housed on a computer’s software files.
  • hardware wallet is a physical device, comparable to a USB drive.

Crypto Investment Terms

If you’re not sure what a whale is — or if you’ve ever wondered what HODL really means — just keep on reading to find out. Note that some of the terms used by crypto investors overlap with the terms that stock traders use. This article focuses on the terms that are unique to crypto. FOMO: Fear of Missing Out. The term is used in everyday life but has a special place in digital currency circles. In crypto terms, FOMO refers to the fear of missing out on an investment opportunity or on a chance to reap profits from a sale. Investors should be cautious not to make risky decisions because of FOMO. FUD: Fear, uncertainty, and doubt. A vague and pointless sense of uncertainty deliberately spread by investors who want to see the price of a cryptocurrency drop. HODL: This term, exotic as it sounds, simply means to hold cryptocurrency instead of selling when the price drops. The term was born when a certain Bitcoin investor posted a drunken rant on a message board. Some people also define the term with the useful acronym Hold On for Dear Life. ICO: Initial Coin Offering. A fundraising opportunity, similar to IPOs, at which a startup sells new cryptocurrency tokens to investors. Pump and Dump: The practice of “pumping” one particular cryptocurrency by buying it in large quantities and motivating others to invest in it, with the goal of increasing its value, only to “dump” the currency to make a quick profit. “Pumping” is sometimes also referred to as shilling. Whale: An investor who owns a very large amount of cryptocurrency. A whale’s sizeable holdings give him a degree of influence over the market.

Cryptocurrency Terms: Is That Everything?

Let’s be clear — this list is not an exhaustive source on all the crypto terms out there, nor will it provide you with everything you need to know in order to begin trading in the new asset. Most of the time, crypto investors do best when they are working with an experienced partner. Don’t let FUD hold you back from taking advantage of the tremendous opportunities that cryptocurrency represents. Contact Coin IRA today to learn more about the potential of cryptocurrency in your investment future.  
Bitcoin stack up and down arrows

Investing in Cryptocurrency IRAs: The Ups and Downs

For folks who are thinking about building wealth for their future, individual retirement accounts or IRAs are a popular way to combine prosperity and security for the long term. IRAs were first authorized in the United States by the Employee Retirement Income Security Act of 1974. Typically, Traditional IRAs allow investors to shore up a larger wealth base through pre-tax contributions, while Roth IRAs are generally funded with after-tax contributions, so that investment earnings may be able to accrue free of taxes. While IRAs have been around for quite a while, self-directed IRAs (as we know them today, at least) are a comparatively modern invention. The advent of Internet-based stock buying and selling in the 2000s made it easier than ever for financial laypersons to take control of their retirement accounts. Today, there are more choices available to self-directed IRA investors than ever before. Indeed, you're not limited to stocks and cash anymore — and with popular cryptos like Bitcoin getting more attention and gaining mainstream adoption, investors often want to learn more about the pros and cons associated with investing in Cryptocurrency IRAs. Perhaps you're ready to ride the crypto wave and enhance your IRA holdings with some digital assets - but first, you want to be sure that you understand the advantages and risks involved. No worries - we've got you covered. So without further ado, let's dive right into the most important pros and cons of investing in Cryptocurrency IRAs.

Cryptocurrency IRAs: The Pros and Cons

The most obvious benefit of a Cryptocurrency IRA is that it would enable you, the investor, to participate in any gains that might occur in digital assets. In one survey, 40% of responders expected that the Bitcoin price will be at least $50,000 at the end of 2021. While there are no guarantees that any cryptocurrency's price will increase, at least you'll get good exposure to the movements in the asset prices through a Cryptocurrency IRA. The next advantage to consider is the diversification that a Cryptocurrency IRA could provide to the investor. As the old saying goes, you don't want to put all of your eggs into one basket — meaning, it's not recommended to pour your entire account into just one asset class. Maybe you've got stocks or cash already in your IRA account. That's fine, but is that enough diversification? Cryptocurrency prices tend to move separately from stocks — and having uncorrelated assets is a key component of proper diversification. In the aforementioned survey, 28% of the respondents stated that their primary reason for buying crypto was due to inflation concerns. As long as more dollars are being printed up, the cash in your IRA is susceptible to inflation, which means the gradual deterioration of the value of that cash. One way to possibly shelter your IRA's holdings against the negative impact of inflation is to own a cryptocurrency like Bitcoin. Since there will only ever be 21 million Bitcoins mined, inflation is less of a concern — and that's why plenty of investors use it as a hedge against inflation. In addition, a Cryptocurrency IRA may offer tax advantages. Without delving into specific tax codes, it may be possible to have your distributions taxed at a more favorable income tax rate once you're retired and earning less (please refer to a licensed and registered tax professional for more information on this topic).

Is Investing in Cryptocurrency IRAs Risky?

Any investment strategy involves risks — as they say, no risks often correlate with no rewards. Still, it's important to be aware of the risk-versus-reward balance when it comes to Cryptocurrency IRAs. There is the possibility of capital loss if the asset in question — in this case, cryptocurrency — goes down in price. But then, you could say the same thing about an investment in any asset class, including stocks. We already touched upon the topic of taxes, and if your gains from a Cryptocurrency IRA are substantial, it at least provides you the opportunity to spread out the income tax liability by taking distributions over a longer term. Some might say that this isn't such a bad problem to have, though. Finally, there's the risk of over-investment if someone were to allocate too much capital into cryptocurrencies. This hazard can be avoided by always maintaining a reasonable position size relative to your account overall.

Special Considerations

Along with the considerations mentioned above, there are a couple of important matters to keep in mind. As the U.S. Securities and Exchange Commission (SEC) explains, you'll want to be wary of anyone offering "guaranteed" returns for your IRA. There's always some degree of risk involved in the world of investing — it's just a matter of knowing those risks, and minimizing them when appropriate. Moreover, the SEC stresses the importance of staying informed — and rightly so. Even if you're using a "set-it-and-forget-it" type of investment strategy, you'll still want to be aware of what's inside of your Cryptocurrency IRA. The key phrase here is "know what you own" — a credo for all informed investors to abide by.

Take Advantage of a Cryptocurrency IRA — The Right Way

Most importantly, you'll want to avail yourself of trusted information sources when you're ready to set up your Cryptocurrency IRA. Ready to get started? It's easy and hassle-free —simply visit Coin IRA, a fully compliant and licensed institution that will guide you through safe buying, selling, trading, and storing of Bitcoin and other cryptocurrencies.  
Man reading cryptocurrency news on a laptop screen.

Cryptocurrency News You Can Trust: Top 4 Sources of Credible Info

Beating the markets and profiting in the long term means having access to reliable data and accurate, unbiased, up-to-the-minute news. This is particularly true when it comes to the action-packed and constantly changing world of cryptocurrency and Bitcoin. Filtering the best from the rest means focusing on facts rather than opinions. After all, cryptocurrency price predictions are everywhere, but as an informed investor, you shouldn't just take anyone's word for it. In other words, the best approach is to gather the facts from sources that have a solid reputation for gathering data and presenting it in a timely, unbiased manner. Then, when you combine the data with your overall investing strategy and a healthy dose of common sense, you'll be much better equipped to invest successfully in the Bitcoin and crypto markets. With that in mind, let's hone in on four informational sources (in no particular order).  They are all good in different ways and are widely trusted among Bitcoin and cryptocurrency traders and investors.

CoinDesk (coindesk.com)

CoinDesk truly is a one-stop shop for reliable information centered around crypto and the blockchain. Sure, you've got the latest cryptocurrency news on the home page, but there's much more to CoinDesk than that. For example, you can visit CoinDesk TV to view video programs featuring daily and weekly updates from respected cryptocurrency and blockchain authorities. Or, maybe you're a crypto newbie and you just want to learn the basics of digital currency investing. In that case, you can check out CoinDesk's Learn section, which features a veritable Crypto 101 with tutorials on everything from Bitcoin basics to blockchain for beginners. And if you don't mind some commentary mixed in with your news, feel free to peruse CoinDesk's Podcasts page. There, you could literally spend all day listening to news and views on the latest happenings in the crypto-verse. As you can see, CoinDesk offers multiple ways to digest your crypto-centered news. But most importantly, CoinDesk is an established media portal that's been around since May 2013 and is continues to provide relevant, timely data for crypto connoisseurs worldwide.

CoinTelegraph (cointelegraph.com)

Among CoinDesk's chief rivals is CoinTelegraph, which covers fintech, the blockchain, and Bitcoin, while bringing its visitors "the latest news and analyses on the future of money." Like CoinDesk, CoinTelegraph was founded back in 2013. The portal's team members are spread across the globe, and they seem to practically live and breathe crypto and the blockchain. The news reporting you'll find at CoinTelegraph is rife with passion for the blockchain, yet also appears to be free of bias. Along with the latest news, you can also find in-depth analytics and comprehensive cryptocurrency price charts at CoinTelegraph. One of the more unique features of CoinTelegraph is the way the site divides up the news items among separate pages for Bitcoin, Ethereum, Ripple, Litecoin, and altcoins. CoinTelegraph is also noteworthy for its graphic design. Accompanying the articles on the home page are highly stylized works of art that can immediately identify the pieces as belonging to CoinTelegraph. You may find yourself checking both CoinDesk and CoinTelegraph on a daily basis for the latest cryptocurrency info as they're both quite informative, and perhaps a bit addictive as well.

NewsBTC (newsbtc.com)

Admittedly, while CoinDesk and CoinTelegraph are both generally considered to be credible informational sources, they're also visually flashy and might be overwhelming for some viewers. NewsBTC provides a somewhat stripped-down platform for crypto and blockchain enthusiasts. But don't get the wrong idea—NewsBTC is still a polished and informative source for news related to cryptocurrency price moves, exchanges, mining, and other items of interest. While the name of the platform includes the Bitcoin symbol "BTC", it covers other digital assets as well. Thus, the NewsBTC describes itself as a "cryptocurrency news service that covers Bitcoin news today, technical analysis and forecasts for Bitcoin price and other altcoins." There must have been something magical about 2013, as NewsBTC was also founded during that year.  NewsBTC emphasizes its firm ethical stance, declaring, "we don’t write for the sake of getting page views. We write about Bitcoin news because we love Bitcoin. Simple as that." And indeed, NewsBTC's reporting is markedly devoid of flash and fanfare—no bells and whistles, just clean, clear, and transparent reporting. If you're on board with that, feel free to give NewsBTC a try.

CryptoSlate (cryptoslate.com)

"Cutting edge"— that might be the best way to describe news and info portal CryptoSlate. The news features on the home page are updated quite frequently, so if you're on the lookout for fast and furious crypto-sphere updates, CryptoSlate's got you covered. Established in 2017, CryptoSlate is a relative newcomer to the scene. But don't assume that the CryptoSlate team isn't doing their due diligence. In actuality, this site might be the most data-driven one on this list. As CryptoSlate asserts, the platform "delivers real-time prices and comprehensive data for 2345 cryptocurrencies across 50 industry sectors" and "maintains a directory of 239 fintech companies, 171 crypto products, and 285 people." Now, that's some serious data, and, to be honest, CryptoSlate might not be ideal for crypto and blockchain newbies. Indeed, it seems to be geared toward more intermediate or advanced cryptocurrency fans. But if you believe you're ready to dive into the sea of crypto-centered data, feel free to jump to the home page and browse through CryptoSlate's broad selection of trending and timely news reports.

Cryptocurrency News: Trust, but Verify

At the end of the day, you can gather information from various sources and cross-check them for accuracy, but ultimately you have to decide what's believable and what's not. And with that, don't hesitate to take a look at the four cryptocurrency news sources listed here. Peruse them, use them, and enjoy your journey into the wide world of crypto.  And when you're ready to dive into the exciting world of cryptocurrency investing, you'll definitely want to check out Coin IRA, one of the pioneers in the Cryptocurrency IRA space.  Their experts can guide you through the safe buying, selling, and storing of Bitcoin and other cryptocurrencies.
Group of business people meeting

Crypto Investors: Who Are They?

The Typical Crypto Investor

Most people have a certain cliché in mind when they think about cryptocurrency investors. According to that cliché, the average crypto investor is young and male. He lives in a big city and works at a prestigious job, probably in finance or technology. He’s unmarried and childless, and he pulls in a hefty salary. He may or may not be wearing a designer watch and a designer suit. Is there any truth to that image? Sure – in the same way as there’s a little bit of truth in many stereotypes. There are plenty of wealthy, single young professional men who invest in cryptocurrency and who do very well for themselves. But today, as more and more people are learning about how the digital asset works, crypto investors are a more diverse group than most people realize. This article will take a closer look at crypto demographics and at what kinds of trends are on the horizon in this huge market.

Crypto Ownership

Gemini’s 2021 State of US Crypto Report gives an interesting snapshot of today’s crypto investors. Most owners of digital currency are male, relatively young, and affluent. The average owner is a 38-year-old man who earns upward of $110,000 a year. 74% of crypto holders in the United States are men, and 77% of them are under the age of 45. Additionally, Gemini found that 71% of crypto investors are white. Just 13% are Latino, and 9% are African American. Another 10% are Asian Americans or Pacific Islanders. Those demographics mirror the demographics of taxable investment holders, which also skew white and affluent.

Shifting Crypto Demographics

As the crypto market grows, more Americans say they plan to invest in the virtual currency soon, perhaps within the next 12 months. The new cohort of prospective investors identified by Gemini's survey is far more diverse than the current set of crypto holders. 53% of the prospective investors who spoke to Gemini are women, and 35% live in a small town or in a rural area. The prospective investors' average income is a bit lower than that of current crypto investors, although still high at $107,000. Nearly half of them are over the age of 45. There are other indicators that older Americans are interested in crypto and may eventually lead to a major demographic shift. Even the AARP has cautiously endorsed investment in virtual currency in several of its online publications.

An Inflection Point for Crypto Investing

Rightly or wrongly, many investment firms formerly classified cryptocurrency trading as a form of speculation. Today, thanks in part to a more robust regulatory framework and greater availability of products, financial analysts like Morgan Stanley are redefining crypto as an investable asset class. Analysts point to 2020 as an inflection point, as there was a widespread devaluation of fiat currencies and also a greater public interest in digital wallets and no-touch spending. 2020 was also the year that PayPal began allowing its users to buy Bitcoin using its apps. In the same year, Mastercard announced that it would allow its customers to pay merchants using Bitcoin, and a Visa-backed credit card began offering Bitcoin rewards. The result has been a far greater level of public awareness when it comes to virtual currency.

Institutional Investors

In a 2020 survey carried out by Fidelity, the overwhelming majority (80%) of institutional investors said they were interested in digital assets. 36% said that they were already invested in crypto, and 60% said that the assets should have a place in their investment portfolio. Most of those surveyed said they liked the fact that the asset is uncorrelated to other asset classes and that it is based on innovative technology. Respondents also said that digital currency has a high potential for upside. Blackrock, the world’s largest asset manager, has filed documents signaling its plans to invest in crypto futures. Wall Street investment firms like Paul Tudor Jones and Stanley Druckenmiller have invested in Bitcoin. Mass Mutual, MicroStrategy, and Square have also bought cryptocurrency and are driving public confidence in the asset forward.

Digital Gold

Portfolio managers have often compared Bitcoin to “digital gold” because the asset is decentralized and comes in a limited supply. The creator of Bitcoin, Satoshi Nakomoto, designed Bitcoin with a built-in scarcity; the upper limit for the coin’s supply is 21 million. That scarcity, coupled with the increased demand for the asset, is a big part of why Bitcoin’s price keeps marching upward. Crypto also wins plaudits for being a deflationary asset. Unlike other alternative asset classes, crypto is safe and easy to store, and it can be moved easily as well. Qualities like these are winning over converts to crypto investing and are likely to push the asset class further into the mainstream, leading to increased diversity in the demographics of crypto investors. Worldwide, the jump in crypto investors since 2020 has been staggering. Statista reports that there were 101 million cryptocurrency asset holders in 2020, up from 35 million in 2018 and 18 million in 2017. That number looks poised to keep on rising as an ever-broader swath of investors learns more about the digital asset.

Crypto and Pension Funds

Not surprisingly, several major pension funds have already added crypto startups to their portfolios, and say they intend to invest directly into virtual currencies in the future. In 2019, two pension funds in Fairfax, Virginia decided to invest in the Morgan Creek Blockchain Opportunities Fund.  The pension funds in question manage retirement assets for Virginia’s state police force and for other state employees. Also in 2019, the Hong Kong-based asset manager Legacy Trust created a pension plan backed by cryptocurrencies as well as traditional assets. Legacy’s staff said they had noticed an increased appetite for investment in crypto, and they were confident that the new pension fund would be popular with people around the world.

Education and Crypto Investing

People tend to be anxious about the unknown, and cryptocurrency is no exception to that rule. Inevitably, as investors learn more about how the digital asset works, that early uncertainty turns into anticipation. Today, more investors are recognizing crypto’s enormous potential as a way to diversify their IRA and hedge against inflation. If you’d like to learn more about crypto investing, visit our website or call Coin IRA today to speak to one of our digital asset specialists.
Cryptocurrency on a white background. Mining, storage and protection of digital cryptocoin.

Demystifying Crypto Storage – What Does It All Mean?

In February of 2021, there were over 68 million individuals storing their crypto in wallets. Is cryptocurrency the future? Most would say yes, and this is partially because similar to other currencies, it’s so easy to store. One reason why storing your crypto is fairly simple is that there are several different methods to choose from, each with its respective pros and cons. In most cases, setting up your crypto storage can be done in minutes. Is cryptocurrency safe? When compared to other types of money, yes, but the safety of your crypto depends on how you store it and how you manage the security of your storage solution. What follows are some of the most popular ways to store your crypto, as well as their benefits and potential drawbacks.

Paper Wallets

Paper wallets are one of the most straightforward ways to store your crypto. With a paper wallet, you use a piece of paper that has your crypto key printed on it. Is Bitcoin a good investment for those who like to use paper wallets? Some say yes because you get both the benefits of Bitcoin and the simplicity of keeping your private key on a piece of paper. However, there are significant drawbacks as well. If you keep your piece of paper in your wallet, it may suffer water damage and be illegible or impossible to scan. Further, many printers store info about what they print out, which could expose your private key to anyone who knows how to hack the printer.

Online Wallets

An online wallet also referred to as a web wallet, is used to keep your cryptocurrency and its access information on the internet. An online wallet runs in your web browser and is, therefore, secured by your browser’s security tools. One of the primary benefits of online wallets is their convenience. As long as you’re connected to the internet, you can access your crypto because it’s stored in the cloud. There’s no need to have anything on you, physically, when you manage your crypto or keep track of extra hardware or devices that allow you to see and work with your funds. On the other hand, online storage also exposes you to a few different risks. If someone were to steal your device and you didn’t have multi-factor authentication enabled, they may be able to access your crypto without much effort, particularly if they have your login information. Also, cyber thieves tend to target online storage providers, such as crypto exchanges, knowing that if they are successful, they can gain access to hundreds or thousands of users’ wallet address information.

Omnibus Wallets

With an omnibus wallet, your crypto is stored by an exchange alongside that of others who also subscribe to the same exchange. For instance, if you were to buy $20,000 of BTC, your BTC would be stored along with that of the exchange’s other customers. To access your funds, you provide login information and can then manage your crypto. With an omnibus wallet, you get very strong security, supplied by the company. You also can easily access your crypto by providing login credentials. There’s no need to carry an additional device or travel to a physical location. However, omnibus wallets also come with some risks. If a hacker is able to penetrate the security of the omnibus wallet provider, they could steal your crypto, along with that of other users.

Mobile Apps

You can use a mobile app to store your crypto, and all you need is a smartphone or other compatible mobile device. With a mobile app, you get a combination of ease of use and security. Mobile apps work by encrypting your private crypto key and then storing it on the company’s servers. Because your key is encrypted, even if a hacker were to access the company’s server, they wouldn’t be able to easily access your key without having the decryption algorithm. In some cases, your security is shared between your device and the company’s servers, so a hacker would have to penetrate both to try to access your crypto. Mobile apps also often use biometric measures, such as your fingerprint or a facial scan, adding another level of security. However, with a mobile app, you have to be very careful not to lose your device, otherwise, you may have to use another one to access your funds. This could make it difficult to move or manage your crypto in a crunch. In addition, some mobile apps, such as ZenGo, have limits on the amount of crypto you can buy per month, requiring different levels of verification for each buying limit. Going through different verification processes depending on how much you’re buying could be a drawback for some users.

Segregated Storage

With segregated storage, you store your crypto key, physically, in a vault that is kept separate from those of other people. You would have to physically go to the vault, present access credentials, which could be a physical key or combination and use that to open the vault and get your security key. You would then enter your security key to initiate an online transaction. Segregated storage is very secure in that your key is kept safe by hardware, staff, and a security system designed to protect valuable assets. However, segregated storage is inconvenient for many because you have to physically travel to the storage location before being able to make a transaction.

Mobile Devices—Cold Storage

Mobile storage devices typically work by interacting with another device you use to manage your crypto, such as a laptop or phone. This happens with a USB connection or an air-gapped connection based on a QR code. Without the mobile device, you cannot access your crypto, making it very difficult for hackers to get to your crypto—even if they manage to steal your device and log on to it. Using this kind of solution is also referred to as cold storage, which differs from hot storage, which involves cloud-based storage, such as with an online wallet. You can also choose a mobile device that stores information about each transaction, allowing you to go through your history and glean info about what you’ve spent, transferred, received, and earned. Some devices also give you the option of seeing what’s happening during a transaction, including security measures being applied, while you’re managing your crypto. The biggest downside to mobile devices is if you lose the device, you won’t be able to access your crypto. In addition, if someone were to steal your device and be able to log in to your computer, they may be able to easily access your funds.

Advantages of Owning Cryptocurrency in an IRA

One of the many advantages of purchasing cryptocurrencies through an IRA is the institutional-grade, segregated, multi-asset cold storage for full custody of your digital currencies. With Coin IRA, your IRA assets are also protected by crime insurance that covers internal and external theft on assets held in the care, custody, and control of the custodian's chosen storage provider.  You can gain peace of mind knowing your digital currencies are protected with a combination of advanced security practices and a suite of customized insurance solutions. To learn more about the benefits of a Cryptocurrency IRA, reach out to a Coin IRA cryptocurrency sales specialist today.  
Bitcoin stacks and piggy bank

How to Invest in Cryptocurrency: 401(k) Rollover to IRA and More Techniques

An Individual Retirement Account (IRA) provides you with an alternative to a 401(k) and offers a wider range of options to invest your savings. When planning for retirement, many people choose to conduct a 401(k) rollover to a Cryptocurrency IRA because it typically delivers better returns than other accounts. There are various types of IRAs, the most popular being traditional and Roth, which operate in similar ways but offer different tax benefits. For those who want more control over their investment choices, a self-directed IRA gives you the power to choose exactly where your money goes. A Cryptocurrency IRA is a type of self-directed IRA that provides exposure to the exciting new digital asset class of cryptocurrencies like Bitcoin, Litecoin, and Ethereum. Over the past few years, Bitcoin has enjoyed incredible gains, making it the most profitable asset of the past decade. With a Cryptocurrency IRA, you can benefit from these excellent returns by investing a portion of your IRA into Bitcoin and other profitable cryptocurrencies. Just like a standard Self-Directed IRA which commonly invests in other types of alternative assets such as real estate or precious metals, a Cryptocurrency IRA can be directed towards a variety of digital assets. With the confident backing of the IRS that deems cryptocurrency as property, American's can safely invest in this powerful and promising new asset class. When purchasing cryptocurrency through an IRA, you get the full backing of a trusted, third-party custodian that holds the assets for you. This ensures that your investment is always protected to the highest safety standards, leaving you free to enjoy life with the knowledge that your retirement is secure. There are several methods of funding a Self-Directed IRA, including a rollover, a transfer, and annual contributions. Here we'll look into the various benefits and disadvantages of each option.

401(k) Rollover (or other Employer Plan to IRA)

One of the easiest and most popular ways to fund a new Cryptocurrency IRA is a rollover from an existing 401(k) or similar qualified accounts, such as a 403(b) or Thrift Savings Plan. When changing jobs, many people choose to roll their existing employer-sponsored plan to an IRA because it offers significant tax savings and better investment opportunities. A rollover typically involves transferring the money from your old employer plan, such as a 401(k), into a new IRA, after which you can diversify it into a wide variety of investments of your choice, including cryptocurrency. Once your new IRA account is set up, the rollover request can often be accomplished online or with a phone call to your employer plan administrator. Should you only wish to move some of the funds out of your employer plan, you can also do a partial rollover if the plan rules allow for that.  The IRS has something called the "IRA One-Rollover-Per-Year Rule", which can be restrictive depending upon the way the transaction is completed.  Coin IRA's IRA Specialists are experienced in working within these kinds of IRS rules and will structure your rollover accordingly.  In most instances, your previous plan administrator will transfer the funds directly to your new IRA account.

IRA Transfer

An IRA transfer involves sending funds from an existing IRA to a new IRA. This can be a full or partial transfer of funds. The funds are sent directly from your existing custodian to the new IRA custodian after your new Self-Directed Cryptocurrency IRA account is established. In the case of a Cryptocurrency IRA, you would need to convert any existing stocks or bonds to cash before initiating the transfer. Once the transfer is complete and your new account is credited, these funds can then be used to invest in cryptocurrency assets in your new IRA.  With a trusted cryptocurrency custodian taking care of your assets, you won't have to worry about the complex technical aspects of storing cryptocurrency.

Annual Contribution

As long as you are earning income, you can also fund your cryptocurrency IRA through eligible contributions determined by the IRS according to your age.  You simply make your annual allowable contribution or any portion of it using your earnings or any savings you have. You can do this directly from your personal checking or savings account. Payments needn't be yearly but can be done to your own preferred schedule, whether weekly, monthly or spontaneously, as long as you don't exceed the limit for your age. These are known as annual contributions because the amount you can put in is given a yearly limit by the IRS. For 2021, the combined value of all your IRAs is limited to a maximum contribution of $6,000, or $7,000 if you're over 50. However, if you choose a Roth IRA your annual contributions may be further limited based on your filing status and income and if you're married, whether you file separately or jointly. Even if you already participate in a retirement plan through your employer, you are also free to contribute to an IRA of your choice. In some situations, this could limit the amount of taxable deduction you're allowed but still gives you exposure to the excellent returns that a Cryptocurrency IRA can offer.  Your CPA or tax preparer is the best person to advise you on contribution limits based on your income level, marital status, and filing status.

Discover the Benefits of a Cryptocurrency IRA Today

With a Cryptocurrency IRA, you can diversify your retirement fund beyond just cash or equities and take advantage of the full potential of this exciting new asset class. Coin IRA provides an easy method of investing in real, non-derivative cryptocurrencies through the safety of a Cryptocurrency IRA. To learn more about the benefits of starting a Cryptocurrency IRA, contact Coin IRA today.
Money bag as a NFT: Non-fungible token

NFTs: What Are They and What’s the Fuss?

What's all the fuss about these non-fungible tokens (NFTs)? The Mona Lisa, for example, is an NFT, obviously somewhat pre-Bitcoin, but known worldwide as a unique and valuable work of art.

NFTs are the latest mash-up of “art” with the underlying technology of cryptocurrencies — the blockchain. It’s a kind of art and commerce collision that has produced an explosion of money for a few lucky creators.

This is defining “art” in its broadest sense—so a cartoon, an image of a kitten, a tweet by the founder of Twitter, etc.—these sorts of things have been put up for sale as NFTs.

Recent NFT Sales Create Riches

Here are some recent NFTs:

  • Artist Beeple sold 5000 digital artworks for $69 million through Christie's auction house;
  • The first tweet announcing Twitter; and
  • A collectible baseball card.

These artworks are owned on the blockchain by the people who purchased them — it is a simple transfer of ownership using the protocols set up by Ether. These sales have been very lucrative for some people — raking in millions of dollars.

The beginning of the phenomenon was the problem of digital copying — images, music, and movies — have long had the issue that they can be copied digitally and distributed without any way of getting the originators some money back. Now that you can put digital art onto the blockchain using the applications built into Ether and some other tokens, you can create a kind of digital artist's signature, ensuring it is unique. It's a bit like buying 'Print 5 of 100 (signed) Andy Warhol'. In the art world, you would need the “provenance” — an expert or gallery would certify that this print was a genuine Warhol. By using the blockchain, NFTs have provenance too.

What the Heck Does 'Fungible' Mean?

'Fungible' simply means tradable, identical. One dollar bill is the same as any other. This is really important for currencies — a shopkeeper will accept any dollar bill, they are all the same — even if one is older than another, or even has been used for criminal purposes: it doesn't matter. Bitcoin is fungible too — any BTC is identical to any other one.

However, every address on the blockchain is unique, and using Ether or other tokens other metadata can be added. That's the cryptographic way of adding “provenance”. So non-fungible items are unique — they can even breed! Cryptokitties are each a unique cat on the Ether blockchain and two digital kitties can produce offspring which each have their own characteristics, like real cats. Strange, isn't it?

NFTs and Online Gaming

Another use is in the world of computer gaming. You may know that people purchase in-game items, say a magic sword, with real dollars. Of course, a cheat might sell the same sword many times and there wouldn't be much you could do about it if the game's moderators didn't take action. Using NFTs would solve this problem, and mean that those in-game items could be sold for in-game digital gold pieces, or real-world dollars. Various gaming companies like Decentraland are already using crypto tokens for large multi-player online games.

Tickets for sports or music events would seem another area where NFTs could have an impact, and also reduce the problems of lost tickets, counterfeiting, and ticket scalping. Collectible tickets could be traded just like any other piece of merchandise.

Are There Any Serious Uses of NFTs?

Yes, there are. Non-fungible tokens are another step forward in the development of the cryptocurrency ecosystem. They introduce sophisticated trading and loan systems for various asset types, ranging from physical things like real estate and land to contracts and artwork. By enabling digital representations of physical assets, NFTs are a new form of asset management, in theory streamlining the financial operation of particular assets.

For example, a tract of land owned by a corporation contains a condominium, a shopping mall with offices, and an industrial site with small factories and workshops. These three assets have different values, rents, occupants, maintenance requirements, and many other elements to consider as part of their overall worth.

Let's say the company wants to sell the shopping mall, but keep the other two properties—all the necessary documentation and information could be loaded on the blockchain as an NFT (as the blockchain is just a decentralized ledger) and then marketed, sold and contracts exchanged using dAPPs (decentralized applications) and smart contracts in a much more streamlined and quicker way than the complex, time-consuming existing methods of using realtors, lawyers and other middlemen.

NFTs have been likened to “digital passports” in the sense that they are a representation of all the important components of a physical item, digitized and stored in a tamper-free format on the blockchain — where they can be used for a transaction.

How to Trade NFTs

One particular difference between NFTs and more conventional cryptocurrencies is that you don't trade NFTs on an exchange. A particular piece of art is desired by a buyer and sold to him or her. There are marketplaces for these sorts of NFT price deals, like OpenSea or Nifty Gateway, which has been acquired by major US crypto exchange Gemini.

Once you have acquired an artwork, you can see if its token price goes up. Then you could sell it on the marketplace, just like you would a real painting — although without the hassle of packing it up, insuring it, and mailing it to the recipient. On an NFT marketplace, this happens digitally with a few clicks and the ownership is transferred.

Despite the Hype, NFTs Will Find a Place in the Fintech Ecosystem

Is this a craze or not? Like many things to do with cryptocurrencies, there is a lot of hype, but also a significant step forward for the utilization of cryptocurrencies in advanced financial applications. Although the uses have been mostly frivolous up to now, that should not obscure the reality that a reliable “digital passport” will have a lot of uses in a wide variety of sectors, reducing costs and cutting out expensive middlemen.

Will NFTs become eligible investments for qualified retirement accounts? We don't know just yet, but this could be a future possibility.  In the meantime, if you are excited to become part of the cryptocurrency investment boom, please contact CoinIRA and speak to a cryptocurrency expert to learn how you can acquire cryptocurrencies as part of your retirement planning or personal investment holdings.

Wooden blocks with TAX letters and stack of Bitcoin coins and dollar bill. Taxes on bitcoin investments concept.

How Is Bitcoin Taxed?

It’s fascinating how the exploding rise of Bitcoin’s value has shaken the ground of digitally skeptical investors. Everyone wants a piece of it now! In the meantime, a great part of those who have already invested in Bitcoin is looking for a way to cash out and profit from the unexpected price boom. Apparently, the massive Bitcoin rush keeps us so busy that we neglect a critical moment concerning digital assets - taxation. Above all else, don’t let Bitcoin attributes like “unregulated”, “anonymous”, and “decentralized” lead you to the conclusion that crypto profits are “tax-free”. Even though Bitcoin and other available altcoins are handled outside centralized financial systems, it doesn’t exempt you from tax liability. What tax is applied then? We’ll see. But let’s discuss things step by step. This article will focus on the main regulative points and provide you with a compact guide on how the IRS categorizes your Bitcoin purchases and sales with an important reference to Cryptocurrency IRAs. So, let’s do the math!

How Does the IRS Tax Bitcoin?

Bitcoin and other blockchain-based currencies are frequently referred to as convertible virtual currencies if either they have established value against other regular currencies or if they function as regular currencies themselves. They can be virtually traded and exchanged into both fiat currencies and cryptocurrencies. However, Bitcoin and other altcoins are not considered legal tender in any legal system. In 2014, the IRS issued an official notice according to which all "convertible virtual currencies" must be treated as property, not a legal currency, and therefore are subject to capital gains taxes. This means there will be further taxations in case Bitcoin is purchased, sold, or exchanged. This is the initial distinction that defines how altcoins are taxed, the approach you should take towards correct calculation, and your tax-planning strategies.

Bitcoin Investments

Since the US tax law classifies Bitcoin and other cryptocurrencies as subject to capital gains taxes, you will pay taxes when the gains are materialized. Similarly, to trading stocks, you are obliged to list the gains you’ve received from Bitcoin as income only when you choose to sell them. In simpler terms, the fact that your Binance portfolio grew immensely in volume in 2020 doesn’t mean you need to pay any applicable gains tax yet. Over the past decade, Bitcoin has slowly evolved and has now become a sensible long-term investment. It now resembles gold thanks to two things: the limited reserves and its bright economic value estimation. Therefore, most investors see an incredible opportunity to store Bitcoin in their digital wallets as, by any interpretation of the law, it allows long-term asset growth separated from federal income tax.

Selling Bitcoin

The IRS Notice 2014-21 clearly states that any gains and losses obtained from the sale of Bitcoin are subject to capital gains tax. There is no room for further negotiations - any gain is income, and any income is taxable regardless of the currency you are paid in. In order to determine the amount of capital gain from a transaction that includes Bitcoin, we need to apply two tax principles: basis and holding period. The basis is simply the price you paid for the asset. In terms of cryptocurrency, if you bought your Bitcoin back in December 2017, the basis for your coin is $20,000. The holding period determines the tax rate you will pay for the transaction of capital gain to a great extent. Thus, if you’ve held your Bitcoin for less than 12 months, the regular income tax rate will be applied. However, there is a long-term tax for traders who have kept their BTC for longer than a year. For a single trader with earnings of up to $40,000 per year, the capital gains tax is 0%. Bitcoin traders with income between $40,000 and $441,450 will have to pay 15%, while 20% is calculated for those whose earnings exceed the latter sum. There are a couple of Bitcoin transactions that are not considered a direct taxable event. For example, if you receive Bitcoin as a present or donate some to charity. However, once you decide to spend or sell your Bitcoin gift, taxes need to be applied accordingly. Just note that the gains from Bitcoin mining are not excluded from taxation. Finally, your losses can be used to lower your general taxable income by a maximum of $3,000 ($1,500 for a married couple listing the losses separately).

Paying Goods and Services with Bitcoin

The IRS doesn’t differentiate between selling Bitcoin or using it as a payment method as long as its value on the transaction date (referred to as fair value), is considerably higher than the basis. Let’s illustrate this with an example. You’ve read that Elon Musk is offering people to buy Tesla cars with Bitcoin. So, if you bought Bitcoin for $230 out of curiosity back in September 2015, in 2021, you could afford a decent Tesla model! Since at the beginning of 2021 the price of Bitcoin was around $60,000, you had actually made a gain of nearly $120,000, and according to the IRS, you have to pay 15% of the total transaction provided you earn more than $40,000.

Can I Avoid Capital Gains Tax?

The answer is no. Starting from 2020, the tax 1040 form addresses a specific question on the front page asking the preparer whether they received, sold, sent, exchanged, or otherwise acquired any financial interest in any virtual currency at any time during 2020. It’s an open secret that taxpayers massively ignored this income source for a long time. But there are no “innocent” excuses one can make any more if they want to underreport their capital gains resulting from crypto trading.

Investing in Bitcoin in a Cryptocurrency IRA

Since Bitcoin is considered a property, you can invest in Bitcoin with a retirement account such as a Traditional IRA. You can choose between Bitcoin and other cryptocurrencies supported by IRA custodians such as Bitcoin Cash (BCH), Ethereum(ETH), Ethereum Classic (ETC), Stellar(XLM), Litecoin(LTC), and Zcash (ZEC). Since cryptocurrencies are treated as property, an IRA may be used to invest in Bitcoin. This investment method gained wide public attention because it relieves the taxation burden as long as the assets are held within your IRA account. If your IRA invests in Bitcoin, it is processed the same as any other investment asset, and it is not subject to capital gains tax.  However, if you hold your crypto in a Traditional Cryptocurrency IRA (pre-income tax funds), any distribution will result in 1099 from your custodian and will be taxed as income.

Final Thoughts

The world’s economy is rapidly transitioning towards digital assets. Rocky shifts in the business ecosystem over the years have demonstrated their power, and there is no stepping back. Blockchain technology has already settled as the “new normal”. Prepared or not, cryptocurrencies are the future of finance. If you still feel reluctant about digital investments, contact our outstanding Coin IRA team of crypto specialists - they know the way and will gladly educate you. With their substantial experience, you will learn that the process of investing in your future has never been easier.
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