Bitcoin IRA Options Today

In our last article, we reviewed self directed Bitcoin IRAs. This week, we’ll take a look at some of the current available options.

IRA programs are focused on making cryptocurrency accessible to retail investors. There is a focus on access and security, with friendly operators standing by to help out. The products are described in broad terms, with little differentiation offered. While this is obviously a new space, the lack of clear information is unfortunate. The companies that want to do best for their investors are going to spend more time on collecting and presenting trustworthy information about various cryptocurrencies to their clients.

For instance, Ethereum is currently the smart contract platform in cryptocurrency, so successful that its biggest problem is too many transactions. Ethereum has 731 tokens currently listed, over an order of magnitude more than its nearest competitor. Ethereum Classic, a hard fork from 2016’s DAO fiasco, currently has 2 tokens on it. These facts are not mentioned in the free investor’s (sic) guide that was offered in return for my contact information. You get what you pay for.

Security

There is a difference between investors who are cryptocurrency fans and retail investors who want to diversify into cryptocurrency. The former know what a private key is, and can explain differences between various cryptocurrencies. The latter are less interested in self custody and are more interested in paying a trusted third party to manage their funds. They may also prefer to put their money into an index of tokens rather than a variety. Neither of these choices is incorrect; there are good reasons for each.

The IRAs that store private keys offer insurance due to fraud or theft. This is an important feature anyone not wanting to hold their private keys should demand. However, the best IRAs need to also insure against lost private keys, multisignature wallet bugs, and other unexpected losses. It is uncertain if the current options do.

Fees are still high. Of the few I looked at, one had a $1395 flat fee, while another charged 15% of one’s deposits. These fees are likely to drop as competition grows, but for now, they make self directed IRAs available only to those who have already put away a good deal of money.

It would be nice to see future self directed IRAs be as simple as online banking, with equivalent fees.

Other self directed IRAs have incredibly expensive monthly and annual fees. For many, this greatly offsets any tax advantages they may have, as paying hundreds of dollars per year to is more than would be saved by a tax advantaged account. One should run the numbers side by side when considering an IRA to see what works best for each individual.

Final Questions for Investors to ask:

Is the big bull run on cryptocurrency over? The high fees in these products make sense when year over year gains are over 1000%, but not when prices are stagnant or reverting to mean growth levels. 2017 may have been peak cryptocurrency: while there seems to be a great deal of money on the sides, waiting to enter, nobody knows what the price of various cryptocurrencies will be in the future. As with any investment, there is no guarantee of price appreciation, and investors have lost billions in past market events (the dotcom bubble wasn’t that long ago) where increasing prices seemed certain. Caveat emptor.

What Hedge Offers

Security:

Hedge leads the industry in providing secure wallets with proprietary best in class distributed cold storage practices. The keys to your funds never touch the internet and cannot be stolen by hackers. There is no single point of failure that can jeopardize your fiduciary.

Applications:

Hedge offers application interface solutions to make your apps work with our apps. Small regional bank looking to compete? Incorporate Hedge’s APIs into your app and give your customers the ability to buy and sell bitcoin through your institution.

Access:

Hedge is the only firm in the industry that gives you 24/7 access to your funds. We net settle transactions in a proprietary process that maintains the safety of keys in cold storage, but with near real time trading.

Let Hedge manage blockchains; you manage your clients.