While investing in cryptocurrency might seem like a daunting task if you’re new, there are ways to make it easier on yourself. One such method is diversifying some of your IRA investment into cryptocurrency. By doing so, you’re offloading a lot of the work onto the company, as well as getting in early on a promising new industry.
If you’re thinking of getting into the market, here are some reasons your crypto may be perfect in an IRA.
1. Tax Savings
Investing in cryptocurrencies by themselves requires you to pay capital gains tax. This means tracking each purchase at the date and price it was made. It can be a big headache and cost you tons in taxes depending on how often you trade.
However, putting that cryptocurrency in a Roth IRA allows those assets to grow without tax, assuming you pull it out after you retire. With many experts predict the asset could reach highs of $100,000 in a couple of years, the profit potential is certainly enticing – especially if those profits can be tax free.
2. Portfolio Diversification
While a more obvious reason for experienced investors, portfolio diversification is never a bad idea.
While cryptocurrencies might be new and speculative, the stock market, which is old and established, can still fall hard. It’s always wise to consider asset classes that can not only provide upside to your portfolio, but potentially hedge your downside as well. It’s an increasingly growing trend that some of the best investors in the world are looking at Bitcoin and Crypto as a piece of their portfolio.
3. Tremendous Growth
Cryptocurrencies are breaking into the mainstream. There’s no denying that anymore. Payments giant PayPal recently added native support for digital currencies. BlackRock’s CEO claimed that Bitcoin could even replace gold, a ringing endorsement for the asset if there’s ever been one.
Since this news, Bitcoin has reached the $20,000 mark – an all-time-high for the world’s first cryptocurrency. More companies than ever are starting to support it as well. Whether you view Bitcoin as a store of value or a currency to replace the dollar, people are paying attention. The value is poised to increase, and investing in a tax-free growth avenue is a great way to take advantage of that.
4. Easy Management
Managing cryptocurrencies via an exchange and a wallet can be a pain, especially if you’re not technically inclined. There’s much to learn about, like private and public keys, the right wallet type to store your assets, and more.
5. Passive Income
Every investor’s favorite words: passive income. With cryptocurrencies like Ethereum, you can allocate some of your holdings into a wallet to earn interest on them in a process called staking. It’s quite similar to putting funds away in a savings account to earn interest.
At iTrustCapital, we’ll be supporting Ethereum staking in the near future. Through our services, you can earn interest on your cryptocurrency with no extra effort! That and the interest will be tax-free thanks to the IRA allocation. This can save you a ton in the long run, especially because cryptocurrency taxation is uncertain.