Gold has played a vital role in economics and politics, influencing much of human financial activity through changes in economic systems. It has proven to be versatile and stable through social upheavals and changes. It even became a vital tool in global trade and currency exchange as we know it today.
In the 19th century, gold was the backbone of the world monetary system. Nations depended on the gold standard until the Great Depression and World War I. These events were important inflationary catalysts and economies, in a transition that lasted decades, abandoned the gold standard.
This process culminated in 1971, when the Federal Exchange could no longer exchange US dollars for gold. In 1976, the gold standard was abandoned completely and gold became a free asset.
Today, it is still considered a reliable store of value with a well-established market. After all, it has had the luxury of centuries – through various cycles of prosperity and economic upheaval – to prove its reputation. Gold is highly liquid and can be easily traded or sold in multiple forms: bars, coins, jewelry or other representative instruments.
Gold vs bitcoin: the battle of uncorrelated assets
In retirement investing, gold is a non-correlated asset and shows an average annual return that has reliably kept pace with inflation. In times of economic uncertainty, Investors opt for gold because of its reputation. as a store of value and its non-correlation with stocks, making it ideal during market declines.
However, the evolution of today’s monetary technology has provided investors with a new option: bitcoin. Although it is a relatively new asset whose economic impact is still developing, bitcoin has already been called “digital gold.” It shares many characteristics with gold, including its limited supply and its potential as a store of value.
Furthermore, bitcoin offers a new type of value in the era of connectivity. It can be transferred digitally, something physical gold cannot do. It is the world’s first digital bearer asset, a remarkable feat achieved through the convergence of economic design, cryptography, and decentralized networks.
For investors, the perfect portfolio – a balance of assets that reflects an individual’s risk preference and fits the economic climate of the time – is an ever-evolving goal. All professional investors and fund managers are looking for new ways to add growth and diversification.
Retirees seek investments that provide diversification, wealth preservation and stability. In addition to this, many retirees seek continued income that can only come from growth: investments that capitalize on the opportunities of the times.
Finding the right mix of less risky, stable and higher risk growth assets has always been a challenge for even the most experienced financial planners. Some believe that bitcoin fits into the new retirement portfolio as an additional diversifier. Like gold, it can function as a non-correlated asset and protect against systemic risks.
bitcoin IRA: Exposure to the best performing asset of 2023
Another way to replicate current investment products is to create bitcoin IRAs. The IRS considers bitcoin and other crypto investments in retirement accounts to be property. Government rules prevent Roth IRAs from being held “coins” and “collectibles”“but these don’t seem to cover bitcoin.
According to the most recent NYDIG reports,bitcoin-price-up-almost-70-year-to-date-as-nydig-ranks-btc-best-performing-asset-class-of-2023-202310091859″> bitcoin exceeds its 2023 returns list based on asset class. As of October 6, 2023, it is up 63.3% year-to-date, outperforming US Large Companies (28.2%), Commodities (6%), Cash (3, 8%) and gold (1.1%). As we count down to its next halving, around April 2024, many investors are considering bitcoin as a potential addition to their retirement accounts.
Some IRA providers already offer cryptocurrency investments in the form of cryptocurrency IRAs, specifically bitcoin IRAs. TO crypto-iras/”>bitcoin IRA It works like any traditional Self-Directed IRA (SDIRA) and carries the same benefits. Instead of investing in bitcoin directly and taking care of its custody, bitcoin IRAs provide convenience, security, and ease to the investor.
A bitcoin IRA allows you to buy and sell bitcoin in a tax-advantaged retirement account. A bitcoin IRA allows retirees to maintain traditional retirement accounts while also having a separate account that invests in novel currencies like bitcoin.
Why add it to your portfolio?
Many bitcoin advocates tout it as “digital gold.” This simplified view has been held and promoted by those who believe that bitcoin can serve as a reliable store of value in digital form.
Based on this vision, investments in bitcoin analogous to gold products are already being created. Just as gold ETFs have physical gold as the underlying asset, bitcoin products are structured similarly to these ETFs and provide exposure through exchange-traded funds.
The first applications for bitcoin ETFs have been filed in recent years, with multibillion-dollar asset managers like BlackRock and Fidelity providing optimism about their future. A DC court’s recent verdict on Grayscale’s bitcoin ETF application, which invalidates the SEC’s argument for denying its bitcoin investment product, has been interpreted as a turning point for the industry.
bitcoin ETF advocates remain vigilant as efforts to gain approval for a spot bitcoin ETF from prominent asset managers persist. Depending on how the SEC reacts, bitcoin ETFs may be approved, opening the floodgates to greater demand.
Make retirement planning less complex with a bitcoin IRA
Despite its status as a new asset, bitcoin‘s performance in 2023 was notable for its ability to maintain a tight trading range despite intense external pressures. It has been trading sideways in the $25,000 to $31,000 range, resisting volatility and breakouts in either direction.
Retirees or those planning to retire interested in adding riskier assets to their portfolios, adapting to the times, and seeking avenues for future growth can add bitcoin to their retirement investments without learning the technical nuances of keeping their bitcoin safe.
They can set up bitcoin IRAs like traditional or Roth accounts. A Roth bitcoin IRA allows for tax-free withdrawals during retirement. A traditional bitcoin IRA offers tax-deferred growth. Retirees in higher tax brackets can take advantage of this feature.
Why consider bitcoin IRAs instead of buying and storing bitcoin directly? bitcoin IRAs easily extend to estate planning, providing a new advantage compared to traditional retirement accounts. bitcoin-ira/”>Swan bitcoin IRA, for example, offers enterprise-grade custody with insurance coverage. It provides an essential layer of protection for retirees who may not be well-versed in cryptosecurity.
Additionally, bitcoin IRAs provide a legal framework for individual investors, protecting them from tax issues, legal uncertainties, and default risks. Investors are assured that their investments fully comply with existing financial regulations.
Despite being a novel instrument, bitcoin IRAs can provide a path for continued wealth creation during retirement. They offer the potential for growth, diversification and tax advantages in a single package within the framework of a familiar and regulated environment. They are a way to benefit from the uncorrelated nature and future potential of bitcoin.
As with any investment, retirees should consult a financial advisor to confirm whether a bitcoin IRA investment fits their resources, risk tolerance, time horizon, and financial goals. In a brave new world of retirement planning, bitcoin IRAs offer an innovative and compelling alternative proposition for exploring the rewards of bitcoin investments, even for those who don’t delve into the technological complexities of cryptocurrencies.
This is a guest post by Ivan Serrano. The opinions expressed are entirely their own and do not necessarily reflect those of btc Inc or bitcoin Magazine.
