Bitcoin is the hottest topic in the financial world right now. The meteoric rise in value over the past couple of years has gotten everyone talking about Bitcoin. Not only that, but numerous other cryptocurrencies have popped up in recent times as well.
News media is rife with stories of people who became millionaires through investing in Bitcoin and other similar currencies — but is it all hype? Are cryptocurrencies a good investment? The short answer to this question is that it’s risky to invest your money into cryptocurrencies like Bitcoin.
There are significant advantages of investing in cryptocurrencies, but there are also numerous disadvantages that you should be well aware of before taking the plunge into this new financial frontier. Keep reading to learn more about the pros and cons of investing in Bitcoin IRA.
Pros of Investing in Bitcoin IRA
1. Unlimited Potential Growth
Bitcoin has become increasingly popular over the years, and it has also grown in value. It’s possible that the currency could continue to grow in value, and you could see an increase in your investment if you invest in a Bitcoin IRA.
2. Accounting Flexibility
Unlike other retirement accounts such as 401(k) plans or traditional IRAs, a Bitcoin IRA offers greater flexibility when accounting for fees and gains. You can use any type of accounting method that works best for your situation, whether LIFO or FIFO, which aren’t typically allowed with other types of retirement accounts.
Compared to other IRAs that deal with stocks, Bitcoin IRA does not have any tax advantages. However, it does not have any costs associated with buying and selling stocks, thus making it cost-effective.
4. Exposure to Digital Currency
There are a lot of benefits when you invest in digital currency like bitcoin. For example, you can get a good return on your investment if the asset’s value increases significantly over time.
Cons of Investing in Bitcoin IRA
1. You Must Pay Taxes
When you put money into your IRA, you must report it as income on your current year’s tax return. You will pay taxes on the contributions you make during the year, as well as any capital gains or losses that occur when you sell your investments.
2. You’re Responsible for the Security
With an IRA, if your account is hacked or someone steals your information, it’s up to you (not your brokerage) to figure out how to get it back. It includes figuring out how much was stolen and reporting it to the IRS.
3. Volatile Market
Although the value of Bitcoin has increased dramatically over the last several years, that doesn’t mean that its value will continue to rise. The value of Bitcoin has been volatile. It means that you could invest a significant amount of money into this digital currency and then see its value decrease significantly within a short period.
One of the biggest risks associated with investing in digital currency is that hackers are always looking for vulnerabilities. In 2014, MtGox — one of the largest cryptocurrency exchanges at the time — was hacked, resulting in millions of dollars worth of Bitcoins being stolen from users’ accounts.
As new investors enter the market, there are growing concerns about the long-term viability of Bitcoin as a currency and an investment. Regardless, interest in money seems to be growing. If you have purchased some Bitcoins and want to continue investing, or if you’re thinking about taking your first plunge into the market, then an IRA is undoubtedly worth considering.