Bitcoin IRA is a self-directed trading platform that lets you buy and sell cryptocurrencies and gold within a tax-advantaged individual retirement account (IRA). The platform helps you roll over existing retirement accounts into a self-directed crypto IRA, where you can trade a limited selection of cryptocurrencies within an exchange based in the U.S.
How Bitcoin IRA works
Like its name suggests, Bitcoin IRA lets you diversify your retirement savings by investing in cryptocurrencies, including Bitcoin and eight altcoins, as well as gold. It’s not a crypto exchange or wallet, but a platform to manage your IRA and access crypto exchanges and a wallet.
You can fund a new Bitcoin IRA account by rolling over a minimum investment of $3,000 from your existing IRA, 401(k), or 403(b) funds. You can’t transfer cryptocurrency holdings from another platform into your Bitcoin IRA because of IRS regulations. Any virtual currency you buy through the platform must be done in USD.
Bitcoin IRA will execute your rollover within three to five business days, and you can begin trading through the platform. Funds remain inside your account, a self-directed IRA, within the platform, so you’re not subject to capital gains or dividend taxes, and money you contribute to the account is tax deductible.
Like any self-directed IRA, Bitcoin IRA will only execute trades you tell it to. You’ll choose which currencies to invest in as well as when and how much to buy, trade, or swap. Crypto on Bitcoin IRA accounts are stored in a BitGo digital wallet — a “cold wallet” with 100% offline storage. That’s a common security feature that protects your crypto asset from hackers.
If you hold at least $10,000 value in cash, Bitcoin, or Ethereum in your retirement account, you can earn up to 6% APY on the coin, compounding monthly. Because your holdings are in a retirement account, early withdrawal will subject you to tax penalties. You’ll pay income tax and an early withdrawal fee (usually 10%) if you pull money out of the account before you’re 59 ½. You can always sell your funds to reinvest in a different IRA.
Top perks
Tax-deferred crypto investing
Because it’s a self-directed IRA, your Bitcoin IRA account lets you make long-term investments in alternative assets of your choosing without paying taxes on capital gains or dividends. Like any traditional IRA, your contributions are tax deductible in the year you make them, and you’ll only pay taxes when you withdraw funds. You could, however, pay an additional penalty if you withdraw funds before retirement.
Low-cost gold investing
In addition to buying digital currencies, you can buy gold through Bitcoin IRA. The fees and process work the same way as those for crypto investing, except you’re buying ownership rights to physical gold bars. Bitcoin IRA gold bars are held in bullion vault facilities by leading security company Brink’s — yes, the same Brink’s from the trucks you see driving around your city. The assets are regulated by the New York State Department of Financial Services. Bitcoin IRA removes a lot of brokerage and storage costs traditionally associated with buying gold. So, you’ll pay lower fees, and the structure is the same as the fees for crypto investments.
Interest-bearing account
Along with the potential long-term growth of your IRA, you could earn interest on the cash, Bitcoin, and Ethereum in your Bitcoin IRA account through its IRA Earn program. Rates include:
- Cash: 6% APY
- Bitcoin: 2% APY
- Ethereum: 2.7% APY
You must have at least $10,000 value per coin in your account to earn interest. You have to opt into the program, and you’ll pay a $100 fee to start and a $100 fee to stop the program.
What could be improved
High fees
Bitcoin IRA charges both a platform fee on the initial investment and for subsequent trades, in addition to ongoing custodial fees. These fees are common for bitcoin IRA accounts, but it is worth considering if the fees make sense before opening an account. Our fees section below discusses the fees in more detail.
No buying with crypto
Because of IRS regulations, you can’t transfer cryptocurrency holdings into an IRA. The IRS requires you to buy into your IRA with U.S. dollars, even when buying into a cryptocurrency account. This isn’t limited to Bitcoin IRA; it’s an IRS rule that applies to any crypto-based retirement account.
Small crypto selection
Bitcoin IRA only offers nine cryptocurrencies to invest in. Top coins, including buying Bitcoin and buying Ethereum, are available, but this isn’t the platform for you if you’re interested in purchasing a broader selection of altcoins. It does, however, give you access to gold investing, which isn’t available on every crypto platform.
Limited liquidity
Investing in any type of retirement account limits the liquidity of your assets — i.e., your ability to withdraw and spend money when you need it. This doesn’t mean your funds are locked in a Bitcoin IRA indefinitely; you can roll over into another retirement account in the future, just as you can with any retirement account. However, if you transfer your retirement investment from crypto to the traditional stock market, you face the potential for a significant swing in its value, which you probably wouldn’t experience with a typical IRA.
You’ll also face tax penalties and fees anytime you withdraw funds from your account to spend or hold onto outside of retirement savings.
Pros
- Tax-deferred crypto investing
- Low-cost gold investment
- Interest-bearing account
- Full-service IRA rollover
- U.S. regulated
Cons
- High fees
- Fee transparency
- No buying with crypto
- Small virtual currency selection
- Limited liquidity
Cryptocurrency selection
Bitcoin IRA offers access to just nine cryptocurrencies, including Bitcoin and eight popular altcoins.
- Bitcoin (BTC)
- Ethereum (ETH)
- Ripple (XRP)
- Litecoin (LTC)
- Stellar Lumens (XLM)
- Zcash (ZEC)
- Bitcoin Cash (BCH)
- Ethereum Classic (ETC)
- Digital Gold (DG)
Conclusion
Bitcoin IRA works with platforms and custodians based in and regulated by the U.S. Your assets are insured up to $100 million through BitGo Trust; plus, the custodian, BitGo, protects your account through rigorous security measures. Your assets are held by BitGo in cold wallets — i.e., offline storage that protects your account from hackers. Bitcoin IRA’s platform uses bank-level security to keep your identity and financial information safe.
