People have been considering Gold the safest investment for ages, especially when the economies go into recession. Can we also say that for Bitcoin, which is famous for speculation? Bitcoin is giving tough competition to Gold, and we usually refer to it as “The Digital Gold of the modern world.” It has the potential to become the new wealth storage standard.
Gold and Bitcoin have some common characteristics despite having fundamental differences. That is why some investors have started considering Bitcoin digital currency as an investment option for special IRAs (Individual Retirement Account), similar to Gold IRAs.
WHAT IS BITCOIN?
Bitcoin is a digital cryptocurrency that is not controlled by a single person or organization. This encrypted currency operates on a peer networking basis.
Bitcoin came into existence in Jan 2009 as an unknown currency with near-zero worth. And today, one coin is worth more than $8500, which keeps on changing frequently.
The Bitcoin trading network is open to the public. Any person can verify and examine it without divulging any personal details in the public domain, e.g., your name, address, or identification numbers are kept confidential.
The reason why Bitcoin became so popular in a short period is that you can exchange bitcoins in your wallet by using a mobile or laptop app without any need for a central clearing agency. If we compare Bitcoin with conventional payment systems like Visa or PayPal, people criticise it for being slow, expensive, and less energy-efficient. However, the idea of Bitcoin is not to replace these conventional payment systems but to complement them. People see it as a potential new wealth storage option in place of Gold instead of evolving as the next most significant primary payment system.
The ability to quickly use an asset (buy or sell) defines how liquid it is. You can purchase Bitcoins from several exchange websites rapidly and can access them directly most of the time. For instance, you can easily buy bitcoins from Coinbase, an online exchange that allows users to collect the coins before the wire is fully complete.
However, remember that you can not trade the coins unless the purchasing process gets completed. It has a flip side that you have to immediately bear the price volatility, which may go against you. It implies that you are more susceptible to unfavorable price movement risks.
Comparatively, the liquidity of Gold is not that high. You may not buy Gold as quickly as bitcoins because you are buying it physically. You may also have to pay a high premium and taxes. Moreover, it isn’t easy to find buyers readily. On the other hand, Bitcoins have a ready market globally, which can be easily accessed.
BITCOIN IRA VS. GOLD IRA
A conventional IRA provides the tax benefits for investments in stocks. In Bitcoin IRAs, you can invest in Bitcoin Cryptocurrencies in addition to traditional investment options like stocks and MFs, which will give you the same tax benefits as conventional IRAs. It implies that you will get higher growth in terms of pre-tax contribution and compounding returns. But remember that it involves a high degree of speculation due to a volatile bitcoin market. It is very risky, even for well-diversified IRAs.
There are many shortcomings in Bitcoin IRAs. Firstly, the fees charged for them are on a much higher side since many companies are unwilling to offer bitcoins IRAs, a relatively novel concept. Secondly, you may not hold their custodian responsible as most of them are autonomous.
Comparatively, Gold IRAs provide the same tax benefits as a regular IRA and let you buy Gold online through brokers. It is an investment with a longer horizon for many people, providing the flexibility to hedge against unfavorable price movements in other types of asset classes.
In Gold IRAs, the investors get the advantage of buying physical Gold. It means they will be free from the problems of handling physical Gold themselves and will not have to worry about its storage, which is another security issue. But all that comes at an additional cost in the form of higher fees. If you are more interested, do a proper research to find out things like online storage charges, custodian margins, cashing out costs, and seller markups. According to Raremetalblog.com some of the top gold IRA specialists are:
- Advantage Gold (source: www.raremetalblog.com/advantage-gold)
- American Hartford Gold Group (source: www.raremetalblog.com/american-hartford-gold-group)
- Goldco Precious Metals (source: www.raremetalblog.com/goldco)
- Regal Assets (source: www.raremetalblog.com/regal-assets)
- Noble Gold (source: www.raremetalblog.com/noble-gold)
- Patriot Gold Group (source: www.raremetalblog.com/patriot-gold-group)
- Rosland Capital (source: www.raremetalblog.com/rosland-capital)
Investments in alternative IRA asset classes demand proper homework as they are highly volatile compared to conventional investment options.