Although crypto has been in existence for more than ten years, it was not until recently that it gained mass appeal; with more than one in eight Americans investing in the digital currency over the past year. Characterized as a digital financial asset, cryptocurrency utilizes cryptography to guarantee network security, supervise the production of extra units, and authenticate asset transfers.
Crypto is a form of currency that is entirely situated within the blockchain digital realm and is not subject to any individual or institution’s authority. Its decentralized nature appeals to those who see it as a promising substitute for conventional assets with potential for future expansion and adoption.
In 2009, the initial cryptocurrency was introduced by an individual (or possibly a group of individuals) who identified themselves as Satoshi Nakamoto. Bitcoin was the name given to this cryptocurrency. In the years following this introduction, over 11,000 additional cryptocurrencies have been established, with hundreds added each year.
Why is Crypto Viable As An Investment?
Investors can find extraordinary opportunities through crypto that they cannot find in traditional assets.
To begin with, cryptocurrency displays minimal correlation with conventional assets and serves as a safeguard against inflation, making it an effective measure of safeguarding wealth when interest rates are poised to increase or there is high inflation. Because cryptocurrencies are less linked to traditional assets, they offer downside protection, which assists in decreasing overall portfolio risk.
Crypto is a great way to generate high alpha. Looking at the past, Bitcoin has provided an average yearly return of approximately 230% ever since its beginning. This is over ten times higher than the Nasdaq 100’s return during the corresponding time frame.
Millions of new investors have been enticed to participate due to the distinctive qualities that are inherent to crypto and provide these advantages.
First, crypto is permissionless. This means that anyone can invest in it without needing to get approval from a third party. There are no barriers to entry and no restrictions on who can participate in the market.
Crypto is decentralized, which implies the absence of a single control point susceptible to cyber attacks. By being open source and transparent, the code becomes less vulnerable to nefarious individuals who seek to operate within the system unnoticed.
Crypto is immutable, meaning that any changes to an asset created within the system require consensus from all holders of that asset. In other words, all cryptocurrency holders must agree before any modifications can be made.
By virtue of blockchain technology, crypto provides users with full authority over their monetary resources and assets, thus granting them financial autonomy from banks and governments.
Types of Crypto Investments
Next, we will examine several individual cryptocurrency investments:
- Stablecoins
- Security Tokens
- Staking Tokens
- Decentralized Finance (DeFi)
- Non-Fungible Tokens (NFTs)
Stablecoins
A form of digital currency called stablecoin is designed to maintain a steady price relative to other currencies by tying its value to a different asset like the Japanese yen or the US dollar.
Stablecoins prove to be advantageous for safeguarding against losses. In the event of a Bitcoin decline, it may take an extended period to exchange your cryptocurrency for fiat, followed by another prolonged process for re-entering the market owing to the sluggish nature of the conventional financial system. By contrast, you can quickly transform your cryptocurrency into a stablecoin within minutes.
Stablecoins have existed for a considerable period, however, only recently have they gained more popularity due to their potential utilization in various financial services and other fields. Stablecoins may serve as security for loans on DeFi platforms and serve as an alternative payment option on e-commerce platforms such as OpenBazaar.
Tether (USDT) is the most popular stablecoin but has faced criticism for its level of transparency and whether it has adequate reserves. Other stablecoins include USD Coin, Binance USD, and Dai from MakerDAO.
Security Tokens
A new type of financial asset, known as Security Tokens, has emerged. These tokens are digital versions of tangible assets, such as equity, debt, real estate, or valuable items like gold or artwork, which can be exchanged on a blockchain.
By allowing for free trading on open exchanges and enabling investment in assets that may be difficult, if not impossible, to trade otherwise, Security Tokens have the ability to revolutionize the financial industry and lead to a new age of democratized capital access.
Real estate investors usually find it difficult to quickly liquidate their assets due to the illiquid nature of the real estate market. Nonetheless, investors have the option of buying fractional ownership in real estate through a Security Token Offering (STO).
Staking Tokens
Securing blockchain networks is achieved through staking, which entails holding a certain quantity of cryptocurrency for an unspecified duration in exchange for potential rewards.
Staking offers numerous advantages such as aligning your interests with that of the network’s stakeholders, who are the ones operating and maintaining it, and permitting them to transact with no charges. This helps to safeguard the blockchain network and maintain its long-term sustainability by preventing any spam attacks on the chain.
You can significantly mitigate your exposure to price fluctuations by allocating some of your cryptocurrency portfolio to work on your behalf, rather than solely relying on the network.
Staking Ethereum
Currently, Ethereum operates on a Proof-of-Work blockchain, resulting in the inability to withdraw both staked Ethereum funds and earned rewards. However, this will soon change as Ethereum transitions into a Proof-of-Stake system.
Earning rewards through Ethereum staking involves depositing ETH for a designated period. At present, approximately 7 million ETH are secured in staking with an annual percentage yield (APR) of 6%.
Staking Polkadot
By facilitating blockchain interoperability, Polkadot is establishing a novel decentralized internet.
You can start staking immediately on Polkadot through the Nominated Proof-of-Stake mechanism, but must first wait for a 24-hour “election” window. If you stop staking, your assets will be locked for 28 days, but staking DOT offers an attractive APR of approximately 10%. Currently, Kraken offers stakers an annual reward of 12% for staking DOT.
Staking Polygon (MATIC)
Staking on Polygon is a well-liked option that enables you to easily calculate your potential rewards for staking.
By utilizing sidechains, Polygon serves as Ethereum’s solution to issues such as inadequate transaction processing capacity, delayed transactions, and nonexistence of community governance, earning itself the label of being the “Internet of Blockchains.”
Best Crypto IRAs
If you’re looking to increase your crypto wealth, you may want to consider a crypto IRA which can shield you from capital gains tax as long as you hold onto your investments in your IRA account. Although cryptocurrencies are known for their volatility, they have outperformed nearly every other investment class in the past decade. Past records also show that they typically undergo cycles of both bullish and bearish trends, and have experienced painful crashes after remarkable pumps. However, the crypto market has always bounced back and achieved new all-time highs after every crash except the most recent one. If you’re a believer in a decentralized future and prefer a long-term investment strategy, it’s worth exploring an investment retirement account that grants you access to cryptocurrency while avoiding capital gains taxes.
Having acquainted yourself with the fundamental regulations and constraints of cryptocurrency IRAs, it’s time to examine the top-rated alternatives. Various choices are accessible in the market for comparison, albeit these platforms usually levy more expensive charges than typical crypto exchanges. Regardless, the gains in tax savings make the exchange more than worthwhile.
1. iTrustCapital: The Best Crypto IRA for Beginner Cryptocurrency Investors
Through iTrustCapital’s retirement accounts, you can effortlessly purchase and trade cryptocurrencies and physical gold in real-time, making it the top digital asset IRA trading platform available.
Their pricing is entirely transparent, with a trade fee of 1% for cryptocurrencies and a gold price of $50 over the spot. Moreover, they offer the following services:
- IRA setup at iTrust Custodial Services
- Facilitation of any transfers to your IRA
- IRS and tax reports by iTrust Custodial Services
- Unlimited storage with institutional custody partners
- Platform support and maintenance
2. Bitcoin IRA
Bitcoin IRA offers a comprehensive service that enables you to utilize your IRA to invest in Bitcoin, Ethereum, Ripple, Litecoin, Bitcoin Cash and Ethereum Classic. The range of options available is exceptional when compared to other Bitcoin IRA providers. The company strives to streamline and secure the intricate process of cryptocurrency investment.
BitGo Trust, which utilizes BitGo Inc.’s technology, provides storage and insurance for your digital assets up to $100 million. BitGo Inc. is the biggest processor of on-chain bitcoin transactions worldwide, handling 20% of the world’s Bitcoin transactions and having over $2 billion in wallet assets.
Opening an account with Bitcoin IRA requires just a few minutes, whether it is for rollovers, traditional IRAs or Roth IRAs.
3. Broad Financial: The Best Crypto IRA for a Variety of Alternate Assets
The platform provided by Broad Financial is highly versatile, offering you the ability to direct your IRA precisely as you prefer. This trust enables you to invest in cryptocurrencies, with a fixed fee structure that does not include any form of asset-based or transactional fees. You are free to choose from a wide and unlimited range of tokens to invest in, as well as utilizing any exchange of your choice to conduct these trades.
The structure of fees includes:
- $1195 one-time setup fee
- $100 one-time custodian setup fee
- $380 annual maintenance fee (payable in $95 quarterly installments)
- Free lifetime customer support
- Tax-advantaged accounts
Broad Financial has a notable benefit that sets it apart from others, which is the ability to retain your private keys. When possessing your private keys, you have exclusive advantages that rival companies are unable to offer, such as:
- Choosing the storage format you prefer
- Using an existing wallet
- Customizing your security for your own peace of mind
Investing in can also be done through:
- Real estate
- Private loans
- Precious metals
- Small businesses, etc.
Your retirement funds can be shifted to your preferred destinations, thanks to the high degree of flexibility. This allows you to save time and effort while also boosting your overall assets.
Expertise in Alternative Assets is the Best.
4. My Digital Money
My Equity Trust has partnered with My Digital Money, a crypto trading platform based in the United States, to offer self-directed crypto IRA products. By paying a one-time setup charge of $50, you can invest in your IRA funds and receive tax-free or tax-advantaged earnings that improve your retirement portfolio.
It is possible for you to initiate various IRA accounts such as:
- Simple IRA
- Traditional IRA
- Roth IRA
- Simplified Employee Pension Plan (SEP) IRA
Establish a cash account to initiate trading, and subsequently leverage the MDM platform to execute trades independently of the existing markets. This approach curbs risk and optimizes purchases at the most favorable price points. Additionally, you can employ limit orders, which function by purchasing or selling at predefined prices or following specific price fluctuations.
You possess total authority over your IRA funds and can exercise the option to trade cryptocurrency on the same platform outside of your IRA.
Ideal for investors looking to invest in Crypto through an IRA.
5. BitIRA
Unlike most crypto IRA companies that disclaim responsibility for securing your crypto, BitIRA goes against the norm by providing comprehensive insurance to safeguard your account.
You are provided with authentic cold storage for your cryptocurrency that is secured in a vault and monitored by physical guards at all times. Coupled with exceptional customer service, you can be at ease even if you are a novice to cryptocurrency investment.
BitIRA offers a variety of cryptocurrencies, such as Bitcoin, Bitcoin Cash, Litecoin, Ethereum Classic, Ethereum and Ripple.
Retiring off Cryptocurrency With a Crypto IRA
A crypto IRA can be a practical solution for adding growth potential to a long-term portfolio. For those nearing retirement, cryptocurrency can also serve as a protective measure against inflation or low-interest rates. It’s important to keep in mind the inherent volatility of cryptocurrencies. If your goal is wealth preservation rather than growth, it’s advisable to consider a conventional retirement account. Although having some crypto exposure as a retiree can be beneficial, it shouldn’t be the sole investment in your portfolio.
Possibly investing all assets in cryptocurrency, even within the tax benefits of an IRA, might be too hasty. Yet, it could be advantageous to carefully consider how this industry could enhance your retirement years.
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