Gold to Bitcoin: Retirement Assets Change And The Risk of  a  Bitcoin-Based Individual Retirement Account

November 15, 2023

By Anjali Kochhar

Traditionally, gold has been seen as a conservative and uncorrelated investment vehicle, but Bitcoin is beginning to pose a major threat to that.

Changes in economic systems have had a significant impact on gold’s function in politics and economics, influencing a large portion of human finance. Over societal shifts and upheavals, it has shown to be adaptable and steady. In modern times, it even turned into an indispensable instrument for international trade and money exchange.

According to Bitcoin magazine’s most recent reports, 2023 returns Gold was the foundation of the world’s monetary system in the 19th century. The gold standard was in place until the Great Depression and World War I. The gold standard was abandoned by economies over a period of decades as a result of several major inflationary triggers.

When the Federal Exchange could no longer exchange US dollars for gold in 1971, this procedure came to an end. The gold standard was completely dropped in 1976, at which point gold became a free asset.

It is still regarded as a trustworthy store of value with a thriving market today. After all, it has had centuries to establish its name during many economic upswings and cycles of prosperity. Gold is very liquid and easily bought or sold in a variety of forms, such as bars, coins, jewelry, or other tokens.

The Battle of Uncorrelated Assets: Gold Vs. Bitcoin

Gold is an uncorrelated asset for retirement investments, with an average yearly return that has consistently kept up with inflation. Due to its reputation as a store of wealth and its lack of correlation with equities, which makes it suitable during market downturns, investors resort to gold during difficult economic times.

But investors now have a new choice due to today’s developing financial technology: Bitcoin. Even though Bitcoin is still a relatively new asset with undetermined economic effects, it has already earned the moniker “digital gold.” It has many similarities to gold, such as a limited supply and the ability to be used as a store of value.

Furthermore, in the connected era, Bitcoin offers an original sort of value. Unlike physical gold, which cannot be transmitted digitally, it can. Because of the amazing fusion of decentralized networks, cryptography, and economic design, it is the first digital bearer asset in history.

Investments that offer stability, diversity, and asset preservation are what retirees look for. In addition to this, a lot of retirees look for ongoing income, which comes from growth and investments that take advantage of current opportunities.

Even the most seasoned financial planners have always had difficulty determining the ideal combination of less risky, stable, and higher-risk growth assets. Some think that adding Bitcoin as an extra diversifier to the new retirement portfolio makes sense. It can function as an uncorrelated asset and systemic risk hedge, just like gold.

Exposure to the highest-performing asset of 2023: cryptocurrency index funds

The establishment of Bitcoin IRAs is one additional method of copying existing financial products. When investing in retirement accounts, Bitcoin and other cryptocurrencies are regarded by the IRS as property. Regulations prohibiting the holding of “coins” and “collectibles” in Roth IRAs seem to exclude Bitcoin.

Based on asset type, Bitcoin leads NYDIG’s 2023 returns list, according to their most current reports. With a 63.3% year-to-date gain as of October 6, 2023, it outperformed US large caps (28.2%), commodities (6%), cash (3.8%), and gold (1.1%). As Bitcoin approaches its next halving in April 2024, a lot of investors are considering adding it to their retirement portfolios.

Cryptocurrency investments, notably Bitcoin IRAs, are already being offered by certain IRA providers. The features and operations of a Bitcoin IRA are identical to those of any conventional self-directed IRA (SDIRA). Bitcoin IRAs give investors comfort, security, and convenience in lieu of allowing them to handle custody and direct Bitcoin investments.

Using a tax-advantaged retirement account, you can purchase and sell Bitcoin with a Bitcoin IRA. With a Bitcoin IRA, retirees may keep their regular retirement savings and invest in new currencies like Bitcoin in another account.

About the author

Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.

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