Individual retirement accounts (IRAs) have been one of the most popular types of retirement savings accounts since they were first introduced in 1974. Managed and Self-Directed IRAs have continuously evolved ever since, adapting to the changing needs of the public. Now, a new type of IRA is taking the spotlight thanks to the advancement of blockchain technology… and it’s a big one.
This “new” type of IRA comes in the form of crypto IRAs, which have become especially popular over the past months with the approval of Spot Bitcoin Exchange-Traded Funds and the cryptocurrency market bull run. As the name suggests, crypto IRAs allow their holders to gain exposure to crypto assets, potentially increasing their returns and providing them with tax advantages when participating in the crypto market.
With cryptocurrencies like Bitcoin becoming increasingly intertwined with financial services, crypto-based products and services have become normalized. Chainalysis’ 2023 Geography of Cryptocurrency Report shows that the United States is the fourth largest adopter of cryptocurrency despite an ongoing regulatory crackdown.
The United States has failed to move as quickly as other countries to develop a regulatory framework for cryptocurrency and other blockchain-based products. However, pressure from individual and institutional investors, as well as crypto and FinTech companies, has forced regulators to concede on multiple occasions. The approval of Spot Bitcoin ETFs, for example, not only led to the recovery of the crypto market but also to Bitcoin reaching a new all-time high early in March 2024.
Just like the assets they expose their holders to, crypto IRAs benefit from blockchain technology in several ways. For example, the use of smart contracts makes it easy for crypto IRA providers to automate transactions, execute trustless trades, and offer transparent records to all account holders. The additional efficiency, transparency, and security that blockchain brings to the table considerably reduces the potential for errors or misconduct while offering 24/7 accessibility and “off-balance sheet” custody.
Companies like iTrustCapital have been swift at meeting the demand for crypto IRAs as more users flock toward the innovative retirement saving method. Over the past six years, the company has surpassed $8.5 billion in transactions across more than 200k accounts, raising over $128M in funding in the process.
Recognized as the “Best Crypto IRA Investment Platform” in the United States by the Fintech Awards, iTrustCapital has played an important role in the adoption of crypto IRAs. The company has succeeded at making interacting with digital assets as easy and effective as possible through its investment platform, an especially difficult undertaking when it comes to a technically complex product like cryptocurrency.
Crypto IRAs are likely to remain in the spotlight for the remainder of this year as the blockchain space is about to go through major milestones that could further boost crypto’s popularity and adoption. These include long-expected events like Bitcoin’s halving and Ethereum’s Dencun upgrade, as well as the resolution of major legal battles like Coinbase Vs. Sec, which would bring regulatory clarity.
While high returns are of great importance to investors looking to ensure a comfortable retirement, it is important to remember that cryptocurrency investment is not free of risks. In fact, the high volatility of the assets means that investors have to exercise additional caution when investing in them. However, as crypto IRAs are financial instruments designed to invest in the long term, data suggest that cryptocurrency could be safer than assets like gold.
The comparison between gold and cryptocurrency is multifaceted, but it mostly takes place in the form of Bitcoin vs Gold. According to JPMorgan, Bitcoin has replaced gold in the portfolios of most investors, surpassing it by a volume almost 3.7 times higher. This trend suggests that most investors see Bitcoin as a safer and more profitable investment than gold, which has historically been seen as the safest hedging tool.
As the crypto ecosystem continues to evolve and mature, products like Crypto IRAs represent a frontier that investors seem eager to explore. The growth potential of crypto, the technical benefits of blockchain, and the unique tax advantages of IRAs synergize in a way that few financial instruments can achieve. Just like the digitization of finance itself, the rise of crypto IRAs seems inevitable.
