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The United States Internal Revenue Service ruled in 2014 that virtual currency counts as personal property for tax purposes. Virtual currencies are the digital representation of value functioning as a store of value, a medium of exchange, or a unit of account. The digital currency may have a real currency value in U.S. dollars or a foreign currency or simply act as a monetary substitute.

Cryptocurrencies fall under the category of virtual currency. Therefore, they also count as personal property and can be used to invest in retirement accounts like an IRA. 

What are crypto and Bitcoin IRAs and how do they differ from “real currency” investment accounts? How do you choose a reliable crypto IRA that will help you achieve high-yield investments? Are you limited to using cryptocurrency in a crypto IRA or can you diversify your portfolio? 

Learn everything you need to know about Bitcoin and crypto IRAs in this comprehensive guide.

What Is a Bitcoin or Crypto IRA?

A cryptocurrency IRA is a type of self-directed individual retirement account (IRA) that uses cryptocurrency to hold investments rather than cash, stocks, bonds, or precious metals. Self-directed means you have total control over where you invest your savings.

The IRS does not explicitly allow self-directed IRAs to hold cryptocurrencies, but it does not include them on its list of non-permitted investments.

So, cryptocurrency custodians and brokers categorize Crypto IRAs as personal property or capital assets. The IRS taxes cryptocurrencies like bonds, stocks, and other assets.

How to Buy Bitcoin

Interested investors can buy digital currency like Bitcoin through a cryptocurrency exchange. The prices for each kind of cryptocurrency vary depending on the broker or exchange you choose since there are no regulations on cryptocurrency.

Do your research on various sites before you choose a crypto exchange. You can even find websites that compare multiple crypto exchanges all in one place.  

Before you start to buy cryptocurrency or think about investing in a crypto IRA, you need to know what it is and the different types out there.

Learn all about cryptocurrency and discover the 8 most popular types in the United States below.

What Is Cryptocurrency?

Cryptocurrencies have no physical form but exist solely in the virtual space. No governments or banks issue cryptocurrencies and they do not technically count as legal tender.

Almost all cryptocurrencies exist only in the blockchain, a decentralized ledger system comprised of many computers known as “miners” or “nodes.” These computers run the cryptocurrency’s code and house its blockchain.

The blockchain is a collection of “blocks” storing a list of transactions. Each computer involved in the blockchain has the same list of blocks and transactions.

Users can visibly see when new blocks form with transactions. The transparency aims to prevent anyone from cheating the system.

1. Bitcoin

Bitcoin is the world’s most popular cryptocurrency. A mysterious creator known as Satoshi Nakamoto first outlined the idea for Bitcoin in a white paper in 2008.

By January 2009, Bitcoin appeared in the (digital) world. It set the framework for other cryptocurrencies and the use of blockchain technology.

The creator intended for Bitcoin to work as a peer-to-peer cryptocurrency used for everyday transactions. It’s now more a vehicle for investment due to its 1MB limitation on block sizes and other scalability issues.

Only 21 million Bitcoins exist in total. The number of bitcoins miners receive for each successfully created block, the only way to produce more bitcoins, halves every 210,000. So far that’s equated to it occurring about every 4 years.

2. Bitcoin Cash

In August 2017, some Bitcoin miners created a fork in the Bitcoin blockchain to create a new version of the cryptocurrency called Bitcoin Cash. Bitcoin Cash from Bitcoin in several ways, but both use the same agreed-upon foundational mechanisms and have a 21 million supply cap.

Creators of Bitcoin Cash wanted to get back to Bitcoin inventor Satoshi Nakamoto’s original intention to use the cryptocurrency for daily transactions. They did this by increasing the size of each block, the number of transactions each block can handle, and the transaction processing speed. 

Bitcoin Cash Splits Again 

In November 2018, Bitcoin Cash split into Bitcoin Cash ABC and Bitcoin Cash SV (or Satoshi Version).

Bitcoin Cash ABC is now known as Bitcoin Cash. It emerged from the split with an 8MB block (now up to 32MB) and more transaction times (up to 25,000 per block). Bitcoin processes 7 transactions/second while Bitcoin Cash can handle 116 transactions/second. 

3. Ethereum

Ethereum first launched in 2015 as an alternative to Bitcoin. Ethereum also operates as a decentralized, open-sourced platform using blockchain technology.

Ethereum allows the building and running of applications within the blockchain, which protects app users’ data from everyone (even the application’s creators). These SmartContracts and Distributed Applications are known as ĐApps and could be financial agreements between users or new social media networks.

Ethereum has its own cryptocurrency called Ether used to operate the applications within the platform. People also trade Ether as a cryptocurrency on crypto-trading platforms. It’s the world’s second most popular digital currency.

Unlike Bitcoin, Ether has no hard cap and Ethereum generates new Ether at consistent rates.

4. Ethereum Classic

Like Bitcoin, Ethereum experienced a split due to differing philosophies. A group built the Decentralized Autonomous Organization (DAO), a decentralized funding platform based on crowdsourcing, through Ethereum and released it in April 2016.

Users donated money to the DOA in exchange for Ether tokens. The DOA raised almost $150 million in Ether.

On June 17, 2016, hackers exploited known security flaws to steal $50 million worth of Ether tokens. Some users wanted to recover the funds creating a fork to reverse the loss and others did not. 87% of the Ethereum community voted for the fork in July 2016, creating Ethereum Classic.

Ethereum Classic operates more similarly to Bitcoin with a hard cap of 210 million coins. Despite the large vote, Ethereum has grown 30x as large as Ethereum Classic.

5. Litecoin

Litecoin is another type of cryptocurrency that relies on blockchain technology. It’s the third most popular cryptocurrency based on market capitalization. Charlie Lee founded Litecoin in 2011 with a hard cap of 84 million coins.

Litecoin prioritizes transaction speeds with a shorter block generation time and smaller transaction fees.

Litecoin also uses a newer type of cryptographic algorithm than Bitcoin’s SHA-256 algorithm called Scrypt. Scrypt does not allow for the aggressive mining that Bitcoin’s algorithm does, making it more accessible to a greater number of potential miners.

6. Ripple

In 2012, Jed McCaleb and Chris Larsen released Ripple. Ripple harkens back to the original intention of Bitcoin as a decentralized open-source, peer-to-peer digital payment network. It has its own currency called XRP but also allows for financial transactions in other cryptocurrencies and real currencies.

Ripple’s main purpose is to act as a financial middleman to help people send money without banks or other third parties. It does not use blockchain mining, but a consensus mechanism called a gateway that sends and receives currencies through the Ripple platform. Ripple records all the transactions into a public history that does not link back to any accounts or IDs.

Users exchange real currencies for XRP or use the real currency’s own unique gateway. Sometimes a transaction requires more than one gateway to make a chain linking from the sender to the receiver.

7. Lumens (aka Stellar Lumens)

Two years after founding Ripple, Jeb McCaleb created another decentralized, peer-to-peer financial transaction program called The Stellar Network. The Network focuses primarily on transferring currency across domestic and international borders.

The Stellar Network uses a cryptocurrency called a lumen, sometimes referred to as a Stellar Lumen. The lumen has become an extremely popular altcoin with a massive market capitalization of more than $6 billion.

The Stellar Network started with a maximum of 100 billion lumens. In November 2019, the Network burned about half of the original coins outside of circulation. That leaves a maximum supply of 50 billion with 22.1 billion lumens currently available.

8. Zcash

In October 2016, Zooko Wilcox-O’Hearn founded Zcash in response to the security issues with Bitcoin. He used cryptography to enhance user privacy and security compared to other cryptocurrencies and their networks.

The founded modeled Zcash after Bitcoin so the two cryptocurrencies share many similarities. Zcash also only has 21 million coins in total. It also uses Bitcoin’s algorithm with a slight change using semi-transparent processing rather than fully transparent.

Wilcox-O’Hearn also fashioned Zcash based upon a privacy protocol first developed in the 1980s by Matthew Green.

The protocol uses zero-knowledge proofs, a sophisticated mathematical technique known as zk-SNARKs. This allows for transactions to display on the public ledger while keeping the contents of the transactions anonymous.

Advantages of Bitcoin IRAs

Just like a traditional IRA, Bitcoin and other Crypto IRAs offer tax-deferred growth on your crypto investments. That means you get immediate tax benefits on the principal amount invested.

Financial advisors recommend that investors diversify their investments in case of a major market downturn or other volatile activity.

Adding Bitcoins to your IRA can help protect you from that, as long as they maintain or increase in value. It also protects big banks from touching your investments.

Investors can avoid a big capital gains tax by including cryptocurrencies in retirement accounts that accept them. They also get excellent security features through the blockchain network’s peer-to-peer protocol.

Disadvantages of a Bitcoin IRA

The volatility in Bitcoin’s worth over the last few years concerns some investors. It saw a massive high in December 2017 at $16,000/Bitcoin, but it has yet to reach that value again.

Critics also worry that cryptocurrencies will not remain popular in coming years or reach any higher values than they do now.

Since most Bitcoin IRAs are self-directed, they also come with greater risk than traditional mutual funds or stock trading. You must assess the market yourself and decide where to invest your Bitcoin. If you mess up, it’s all on you.

Fees, Fees, and More Fees

Bitcoin IRAs also come with steep setup, trading, and maintenance fees, depending on the provider. For example, the setup fees for a self-directed Bitcoin IRA account of $50,000 could be as high as $6,000. That doesn’t even include the trading or maintenance fees.

Remember that almost all IRAs, whether using real currency or cryptocurrency, have trading fees. The fees vary by provider. They typically range from a flat fee or 1% charge for every sale you make and a 3.5% charge for each purchase.

If you decide to prematurely withdraw, the funds in your Bitcoin IRA face a capital gains tax at the time’s current rate.

Crypto and Bitcoin IRA Reviews

Are you ready to invest your cryptocurrency into an appropriate IRA?

You want to choose an IRA provider with a great reputation known for low fees and good customer service. It should also be easy to set up an account and modify your investments.

Find your best option with the following reviews of the best Crypto and Bitcoin IRAs available to consumers in 2021.

BitIRA

Founded by the Birch Gold Group in 2017, BitIRA is is an online cryptocurrency IRA with awards from both the Business Consumer Alliance and the Better Business Bureau. Unlike most trading platforms, BitIRA charges no transaction fees on your cryptocurrency trades. BitIRA offers many benefits to investors, including:

Self-Directed Investing and Licensed Trust Custodians 

BitIRA allows you to manage investments on your own or with the help of a qualified and licensed trust custodian. They work directly with Preferred Trust Company and Equity Trust Company to guarantee your cryptocurrency IRA stays IRS-compliant.

Bit IRA custodians can help you roll over your assets from your old IRA into your new Crypto IRA. They also insure your deposits up to $3.75 million. 

Excellent Security 

BitIRA focuses heavily on security and stores all of your investments in a digital wallet. Most digital wallets connect to the Internet, known as a hot wallet, leaving them open to data breaches.

BitIRA offers a cold digital wallet that securely stores every investor’s funds on an individual piece of offline hardware. Armed guards watch over these hardware devices 24/7 in a special vault. They also offer end-to-end insurance with multifactor encryption and authentication. 

Specialized Customer Service Support 

BitIRA offers dedicated customer service support for both cryptocurrency questions and IRA questions. Each department has specialized staff trained to deal with the nuances of one or the other.

Invest With a Variety of Virtual Currencies 

You can trade with Bitcoin, Bitcoin Cash, and Litecoin. BitIRA also allows trades with Ethereum, Ethereum Classic, Stellar Lumens, and Zcash.

Multiple Accounts With Minimal Fees 

BitIRA offers a self-managed Bitcoin Roth IRA, a Bitcoin SEP (where employers can contribute), and a traditional IRA.

Rather than charging a flat rate, BitIRA charges a fee based on the number of your cryptocurrency trades. It costs $50 to establish an account with a yearly custodian fee between $300 and $1,000, depending on the size of your account.

Bitcoin IRA

Camilo Concha founded Bitcoin IRA in March 2015 in Sherman Oaks, California. It’s operated by AIS, or Alternative IRA Services, and has more than 50,000 account holders.

Bitcoin IRA differs from other Bitcoin IRAs by being an all-in-one, self-directed IRA service provider. Bitcoin IRA offers customers:

Transfer Services 

Don’t waste time withdrawing funds from your IRA and purchasing Bitcoin before investing with Bitcoin IRA. They take care of all that for you.

Bitcoin IRA allows you to roll over traditional, Roth, and SEP IRA accounts. They also permit a current 401(k) if you have left the employer who originally sponsored the account, or you’ve reached 59.5 years old.

Decent Selection of Eligible Cryptocurrencies to Trade 

Bitcoin IRA allows you to trade Bitcoin and Bitcoin Cash, Ethereum, and Ethereum Classic. They also trade in Litecoin and Ripple coins.

Reasonable Account Minimums 

A standard Bitcoin IRA requires a $3,000 initial investment to open an account. Considering the current maximum allowed contribution to an IRA in a single year for individuals and married couples filing jointly is $6,000 (under 50 years old) or $7,000 (over 50 years old), that’s reasonable.

Bitcoin IRA’s newest product called Saver IRA allows you to open an account with as little as $100. You must connect a checking or savings account to the Saver IRA to open one. Then, you must invest $100 monthly to keep the account open.

Earn Interest 

Did you know that you could earn interest on your Crypto IRA? Bitcoin IRA offers up to 7% interest returned on your cash or cryptocurrency.

Service Fees 

Bitcoin IRA charges a platform fee by calculating a certain percentage of the funds in your account. This varies depending upon how much you initially invest.

Initial investments of $3,000-$49,900 get charged 2.5% per year for 5 years, totaling 12.5%. Investments of $50,000-$99,900 have a 2% charge for 5 years, totaling 10.0%. Finally, principal investments of $100,000 or more have a 1.5% fee charged over 5 years, totaling 7.5%.

Bitcoin IRA also has a $240 yearly custodial fee and trade fees of 5% for purchases and 1% on sales.  

Coin IRA

Goldco, a well-known financial services company that focuses on gold investments, operates Coin IRAas a subsidiary. You may purchase cryptocurrencies to invest or rollover monies from another IRA account. Coin IRA’s services include:

Three Ways to Store Your Digital Currency 

Coin IRA gives you more options for how to store your funds than any other Crypto IRA.

You can choose from a self-hosted digital wallet that you control. You can choose a hard wallet hosted by a reliable third-party like KeepKey or Ledger. Or you can allow Coin IRA to manage your funds in a cold wallet in an offline vault with high security.

No Pressure, Lots of Help 

Coin IRA’s customer service staff and brokers will not pressure you into investing your funds into anything in particular. They make their priority educating you about your options, so you can make an informed decision on your own.

Invest With Six Different Coins 

Coin IRA accepts Ether and Ethereum Classic, Bitcoin Cash, and Bitcoin. You can also use Ripple and Litecoin.

Non-IRA Portfolios 

Are you interested in investing with cryptocurrency beyond your IRA? Coin IRA also offers non-IRA portfolios for more experienced investors. These portfolios come with higher trading limits as well.

Insurance on Investments 

Coin IRA offers insurance on up to $100 million for its account holders. It does not matter the type of cryptocurrency you invest in. As long as you qualify for the insurance, you can recover up to $100 million in any coin.

High Minimum, Reasonable Fees 

The minimum investment for opening an account with Coin IRA is much higher than other companies at $20,000-$30,000, depending on account type. However, if you transfer funds from a non-IRA account the minimum is only $3,500.

Coin IRA has a reasonable fee schedule with a one-time $50 set-up and a one-time $30 wire fee. Their annual maintenance and storage fees add up to only $180. They will waive the annual fee if you keep at least $50,000 in your account.

Specialized Security Keys 

Coin IRA secures your holdings by generating keys. Your hard wallet also comes with self-encrypted backups and a special paper backup called "seeds." 

Equity Trust

Equity Trust is one of the oldest companies providing self-directed IRAs on the list with nearly 40 years of experience. It started as a securities firm in 1983 with a focus on real estate investments.

Now, Equity Trust caters to the full spectrum of alternative investments from precious metals and cryptocurrencies to private equity, foreign currencies, and tax lien certificates. Examples of benefits that Equity Trust offers are:

Tools for Education and Assistance 

Are you new to the world of investing? Is this the first IRA you’ve ever opened? You would greatly benefit from Equity Trust’s comprehensive educational tools.

All investors get access to 400+ financial specialists who can help facilitate their investments and transactions. They’ll walk you through every step of the process from setup to choosing investments to maintaining your portfolio.  

No Transaction Fees 

Equity Trust charges no transaction fees no matter how many transactions you perform each year. The account setup fee is reasonable as well at only $50.

Equity Trust does charge slightly higher administrative fees between $205 and $2,150 per year, depending on the size of your account.

Traditional Investments 

Equity Trust started as a securities firm and continues to offer traditional investments. That means you can diversify your portfolio to include EFTs, stocks, and bonds. You can include these traditional investments in your same crypto IRA. 

Wide Range of Cryptocurrencies 

The cryptocurrencies available through Equity Trust include Bitcoin Cash, Bitcoin SV, Bitcoin, Ethereum Classic, and Ethereum. Traders can also invest with Zcash, Stellar, Litecoin, Tezos, XRP, BitcoinSV, and EOS. 

Manageable Pricing and Fees 

Equity Trust charges a monthly flat platform fee of $20 along and a 0.07% cold storage fee based on your balance every month. It charges a 1% fee for each sale and a 3.5% fee for every purchase. Expect to pay a one-time account set up fee of $50 online or $75 offline regardless of account size.

Regal Assets

A young entrepreneur named Tyle Gallagher founded Regal Assets in 2009. Regal Assets specializes in IRAs backed by precious metals like gold and cryptocurrencies. Regal Assets offers benefits like:

Highly Rated Customer Service 

Regal Assets boasts overwhelmingly positive reviews across the board. The Business Consumer Alliance gave it the highest rating, a AAA. Customer reviews praise Regal Assets for exceptional customer service and financial advice.

No Transfer Fees 

Plan to transfer your current IRA over to your new Regal Assets crypto IRA? You do not have to pay any transfer fees for moving your funds into your new account. 

A Wide Selection of Cryptocurrencies 

Regal Assets allows investors to trade with many cryptocurrencies like Zcash, Stellar, Bitcoin, Litecoin, and Ethereum. You can also use Bitcoin Cash, Ethereum Classic, and Ripple.

Invest with Precious Metals 

Diversify your IRA by investing in both cryptocurrencies and precious metals. Regal Assets trades in more precious metals than any other combined IRA provider. You can invest in gold, silver, platinum, and palladium.

Decent Fees and Pricing (First Year Free!) 

Regal Assets offers to waive all administrative and set-up fees for your first year as an investor.

Once you do start paying fees, they’re not unreasonable. There’s a $125 annual storage fee and a $100 annual administrative fee.

“Hacker-Proof” Crypto IRAs 

Regal Assets claims to have a “hacker-proof” digital currency IRA security system. Their offline wallet and cold storage are stored offshore in a private and safe jurisdiction. They guarantee protection from spyware, malware, viruses, and computer crashes as well as physical theft.

Regal Assets insures your assets in case of theft or disaster if something does happen. Even in the event of a natural disaster.

Segregated Storage Vaults 

Would you feel more comfortable with your assets stored separately from other peoples’ assets?

Regal Assets provides segregated storage vaults for investors to keep their investments safe. It even offers the service at the same price that most other companies charge for non-segregated storage.  

iTrust Capital

Blake Skadron, Morgan Steckler, and Todd Southwick founded iTrust Capital in Los Angeles, CA in 2018. It’s a low-cost, self-trade investment platform that allows users to buy and sell cryptocurrencies as well as gold. Services provided by iTrust Capital include:

Easy-to-Use Dashboard 

The iTrust Capital dashboard allows you to conduct all of your tradings in one place. It also shows all of your account features and settings, so you can easily make changes. The easy-to-use dash help you to regulate your investment on your own.  

IRS Compliance 

iTrust Capital is fully IRS compliant and will keep your money safe. It also provides necessary tax and IRS report through iTrust Custodial Services.

Reasonable Minimum Investment Required 

At one-time iTrust Capital allowed investors to open an account with no minimum. Now, you must invest at least $2,500 to open an account, but there remains no maximum.

Low, Low Fees 

iTrust Capital has a transparent fee structure that makes it easy to understand where your money goes.

Investors pay a monthly account fee of $29.95 and then a small fee per transaction. Digital currency transactions cost 1% of the amount transferred while gold transactions have a flat $50 fee.  

Use EOS and Other Popular Cryptocurrencies 

Investors may trade cryptocurrencies like EOS, Bitcoin, and Ripple. It also allows Ethereum, Litecoin, and Bitcoin Cash.

Keep Your Money Secure 

Feel confident your cryptocurrency stays secure with iTrust Capital’s partnership with the digital storage solution called Curv. Curv institutional-grade storage system does not use private keys for extra protection.  

Trade 24/7 

Can’t sleep at night and feel like playing around with your investments? Go for it!

iTrust Capital permits users to trade through its platform 24 hours a day, 7 days a week. That includes both cryptocurrencies and gold.

Highly Rated Overall 

iTrust Capital has received rave reviews across the Internet from customers and industry leaders alike. The Business Consumer Alliance even gave it their AAA rating, the highest they award.

Customers love iTrust Capital’s friendly and helpful service representatives and their trustworthy brokers.   

Choose the Best Cryptocurrency Trading Platform for High-Yield Investments

The steady popularity of cryptocurrency means it will likely become more integrated into our financial lives over the next few years. You should have a better understanding now of the various cryptocurrencies available and how you can use Bitcoin IRAs to diversify and better your retirement investments.

Ready to get started trading with a cryptocurrency like Bitcoin?

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