Bitcoin IRA

December 1, 2017

Should your IRA contain Bitcoin investments? That’s not a question we – or anyone else- should answer for you. What we can say for sure is if you had spent $771.41 on one Bitcoin (1 BTC) December 2, 2016, and sold 1 Bitcoin a year later on December 1, 2017, you would have received $10,790.58, which is an investment gain of $10,019.17 (an annual return of 1,299%).

We can confidently say even in this record-breaking market, it’s very unlikely your other investments performed this well.

bitcoin prices

Bitcoin price on 12/1/2017. Source: Google Finance

Bitcoin explained

Bitcoin is a cryptocurrency, which means it’s a digital currency and unlike traditional currencies, there are no physical bills or coins. As with many other forms of currency, including the modern U.S. dollar, there is no hard asset like gold tied to the value of the currency. Also like other currencies, Bitcoin’s purchasing power is limited by the number of merchants and individuals who accept it. With more than 150,000 merchants and millions of Bitcoin users, conducting a Bitcoin transaction is getting easier and easier.

Bitcoin isn’t like traditional money

To prevent Bitcoin from being infinitely duplicated, and therefore worthless, the currency has a system of controls. All bitcoin transactions are digitally recorded, verified and stored in a public ledger called the blockchain. The maximum possible supply of bitcoins is 21 million, which is projected to happen between the years 2110 and 2140.

Is Bitcoin an option for my IRA?

One great feature of the Individual Retirement Account (IRA) is its flexibility. Retirement investors have a great deal of input on the timing and type of their IRA investments. IRAs can contain stocks, bonds, options, index funds, ETFs and many types of financial investments or commodities. In 2014, the IRS declared Bitcoin a commodity for tax purposes, which paved the way for Bitcoin to be used as an IRA investment, albeit not a typical one.


Bitcoins falling. Source: Getty

While some types of IRA investments are more popular than others (we just created a Gold IRA buyers guide), there is technically no such thing as an approved IRA type (e.g Bitcoin IRA). There are just IRAs, which rely on the various investments that are in the account. In fact, the IRS does not technically approve any kind of IRA investment, but it does make some specific restrictions about IRAs. For instance, if your IRA invests in gold bullion, the bullion must be in specific forms and held in the care of an approved trustee.

Each type of IRA investment has its own risks and potential rewards. Bitcoin’s extraordinary growth may be over; or it may just beginning. Investors of all kinds are unsure about Bitcoin, which contributes to its volatility. To invest wisely, proceed with caution.

Bottom Line: Consistent with good strategy for actively managed approaches to your retirement investments, it’s best to do your research and stay diversified.

How do I add Bitcoin to my IRA?

Most traditional IRAs are not suitable to invest in Bitcoin or other cryptocurrencies yet, so getting started may be tricky.

There are a few Bitcoin IRA management companies that can help quarterback this process for you. Working with a bitcoin management company can help make sure you get all these steps done the right way. A bitcoin IRA management company can increase the amount you can invest in your Bitcoin IRA at one time. “There are daily limits on the amount of bitcoin that you can purchase on an exchange as an individual investor,” says Andy Klein of BitIRA, a Burbank based Bitcoin IRA management company. “With our institutional account on the exchange, we don’t have those limits.”

When you add Bitcoin to your IRA, you’ll be completing this general to do list:

Note: This is not a comprehensive guide. Information on this page is general in nature and is intended for informational purposes only; it is not legal, investment or tax advice.