Is Cryptocurrency the Next Big Gold Mine?
By Peter Rizzo
We are asked on a daily basis if you can invest in Cryptocurrency with your Checkbook IRA or Solo 401(k) and the answer is a resounding YES (as long as you’re not trading with a prohibited party). The next question is always, “If it’s legal, why can’t I find a custodian that allows it?” We can only make an educated guess but suspect these are the reasons:
1. Crypto Currency scares the traditional financial world. That’s because the core of the financial system is controlled by a few while Crypto currency brings us back to the Gold Rush days where value was decided by individuals rather than set by only a few.
2. Because of the volatility of trading, time is of the essence and when all trades must go through a custodian (except in a Checkbook controlled IRA or 401k), they don’t have the administrative infrastructure to prepare paperwork on a timely basis.
3. They don’t know how to charge for their custodial services. They either charge on a per transaction basis (which would be huge if you traded a couple times a day as some do) or a percentage of asset value, which is tricky and changes by the minute and is harder to predict as easily as other asset values are.
These are only our educated guesses, but with the growing popularity that this investment is experiencing, there will be Bitcoin IRA’s and LiteCoin IRA’s or some other form of Cryptocurrency in the future. The only caveat is that you would be required to trade through that Custodian and not have funds to freely trade in the open market.
So YES, Cryptocurrency is legal and you’re free to reap the profits with your self-managed plan. But like any investment, the best advice is to be knowledgeable and invest in what you know or can learn about. Here is a great article on Investopedia that goes over the basics and recommends some articles to give you a greater understanding.
I bought bitcoin and ethereum with my Roth IRA, but it was a rather confusing process. I went through BitcoinIRA first, who set me up with Our Qualified Custodian, then trading with a Genesis (?) platform, but confirmations and balances are not easily available so it almost feels like I am moving in the dark.
I agree that it is such a new concept, fraught with fear and suspicion that this is all a shell game. However, the potential is huge, so I am risking what I can afford to lose, and just galloping along, with eyes closed.