There are many different ways you can invest in crypto.
1- through a CryptoIRA
2- trading in cash
3- directly investing in a company developing cryptocurrencies
4- Blockchain ETFs
Let’s go through each of them.
A CryptoIRA is a common term used when you want to put cryptocurrencies in your self-directed Individual Retirement Account or SDIRA.
Yes, you do need to open a SDIRA first. Not all IRA companies provide SDIRA services. Our partner, Equity Trust, is one of the few reputable ones and one of the biggest IRA providers.
In an SDIRA, you manage your assets yourself, hence the name SDIRA. There are different assets you can put there including cryptocurrencies.
This is best for people who want to hold cryptos for a long time because of the tax benefits. With a traditional SDIRA, you can defer payment of taxes. That means you pay nothing now. Just keep on investing and let it grow.
With a ROTH SDIRA, you pay taxes now and not pay anything when you cash it out upon retirement. That means you don’t pay any tax on your capital gain.
So, let’s assume you buy 1 bitcoin now at $35K. You need to pay taxes for that now. If after then years, you turn 50 ½ and want to cash out, and Bitcoin is worth $100,000, that’s $65,000 in gains. You don’t pay taxes for that.
A CryptoIRA is obviously meant for people who want to grow their wealth for retirement.
Next, is trading in cash.
It’s like stocks but you trade crypto, instead of stocks.
There are many platforms that allow you to trade crypto but you just have to be careful. Not every platform was made the same way.
With Robinhood, for example, you can’t take crypto out of their system. That means, if you want to take physical possession of your crypto, in the form of private keys, you can’t.
The only way you can take your investments out of Robinhood is by liquidating it.
They also sell your data and they are very honest about that.
My Digital Money, won’t sell your data. We’re to help you invest. Plain and simple.
You can also invest in companies developing crypto.
Developers usually go to investors to fund their projects. And no, you don’t have to have millions to be able to invest in a company.
You can be an angel investor. Usually, you need to invest hundreds of thousands of dollars but crowdfunding platforms like FundersClube.com or WeFunder.com allow you to invest for as little as $100.
Needless to say, the risks are higher. You are investing in companies that are just starting up. So, be very very careful. Consult other angel investors and do a lot of research. Even if you are just investing $100, that’s still $100 you will never get back if things don’t work out.
Lastly, Blockchain ETFS.
Blockchain exchange-traded funds (ETFs) own stocks in companies that have business operations in blockchain technology or in some way profit from it.
There are two types of blockchain ETFs: Passively managed and actively managed.
In a passively managed ETF, a fund manager buys a basket of blockchain-related stocks that makes up a broad index. Through one of these investments, you gain exposure to the entire index. This process eliminates the need for fund managers to select individual companies at their discretion.
Contrary to index funds, active investing depends on a fund manager’s ability to pick securities and provide above-average returns. As a result, these investments often come with higher fees and greater volatility than passively managed ETFs.
Blockchain ETFs don’t hold cryptocurrency investments. Instead, these funds only own stocks of regulated companies, of which many are blue-chip technology names like Visa (V) and Oracle (ORCL).
For you to determine how you can best invest in a crypto, I recommend you consult a financial advisor, do your own research, and if you feel a CryptoIRA or trading in cash are two strategies you want to use, call us.
My Digital Money offers both services in one platform. No need to open an account in multiple platforms. You can do it all in one place.