Bitcoin and Other Cryptocurrency Investing with your Solo 401k
How to invest in Bitcoin, Ethereum, LiteCoin and other cryptocurrencies with your Solo 401k
In today’s digital boom, cryptocurrencies offer a unique opportunity.
Never like this has someone been able to get in early and invest in a currency before it became widely accepted. The potential ROI on such an investment alone is enough reason to make such cryptocurrencies an attractive option for diversifying your portfolio.
In addition to the myriad of other investment options available to you with a Solo 401k, cryptocurrencies are yet another unique and valuable investment option.
But what is cryptocurrency? What should you know about it? And how do you invest in cryptocurrencies with your Solo 401k?
Let’s talk about it.
*Important note: Maverick is not a dealer of Bitcoin or any other form of cryptocurrency. There currently are no specifically stated guidelines for investing in cryptocurrencies with a Solo 401k. Having said that, investing in cryptocurrency with a Solo 401k is not disallowed by the IRS.
What is cryptocurrency?
For those unfamiliar, cryptocurrency is a digital asset.
Cryptocurrency works as a form of digital exchange currency using cryptography, which is a practice that includes a collection of various techniques used for secure communication when dealing with third parties.
These cryptographic techniques are used as a means for securing transactions, controlling the creation of currency units, and to verify asset transfers for all forms of cryptocurrency (essentially, every important action associated with the cryptocurrency itself is done using cryptography).
Over the past 10 years, cryptocurrencies such as Bitcoin have gone from an unknown oddity to a household topic with people scrambling to take advantage of the long-term investment potential. There are now over 1,100 forms of cryptocurrency, 9 of which hold a market cap above 1 billion dollars.
The risks of investing in cryptocurrency
For all the potential benefits of investing in cryptocurrency, there are several risks involved as well that must be understood when considering whether investing in cryptocurrency with your Solo 401k is right for you.
The potential risks of investing in cryptocurrency include:
1. Prices fluctuate for a variety of factors
Cryptocurrencies such as Bitcoin can lose as much as 20% of their value within a month’s time, so they’re highly volatile.
This is partly due to the fact that cryptocurrency value is based on global acceptance of the currency as a whole. However, it’s important to note that there has been an uphill trend since its inception in the value of cryptocurrency as a whole, particularly Bitcoin, the highest value and most notable of cryptocurrency.
2. You’re not investing in a proven or concrete investment such as a product or business
By investing in cryptocurrency with your Solo 401k, you’re investing in the currency itself (much in the same way as you would invest in Gold with a Solo 401k) as opposed to something tangible such as a product or business. This makes investing in cryptocurrency more speculative and harder to track.
In addition, unlike gold, which has proven to be a sound investment, cryptocurrency is still young so there is not as much historical information on price fluctuations.
Why invest in cryptocurrency?
While there are risks inherent with investing in cryptocurrency, despite this, cryptocurrency is becoming increasingly popular and a regular inclusion in investment portfolios for several reasons.
Those reasons include:
1. The price is low compared to long term expectations
For virtually all cryptocurrencies, you’re getting in early. This offers a unique opportunity that is hard to come by for any investment type with potentially big returns in the future.
2. Take advantage of the limited supply-demand rule
All cryptocurrency follows a basic principle referred to as the limited supply-demand rule.
What’s so special about the rule? Because of the limited supply-demand rule, the maximum number of bitcoins or other cryptocurrencies that can be created is 21 million.
This is important because it means that the rate of generation on new coins will gradually decrease as time goes on, helping drive the price of the currency higher per unit and offering potentially exponential returns as a result.
3. It’s a brand new technology
Cryptocurrency may very well continue to grow and become more widely accepted around the world. As a new form of technology with this kind of potential to become more of a main-stay, investing in cryptocurrency offers the potential for long-term returns.
How to Invest in Cryptocurrencies with Your Solo 401k
Investing in cryptocurrency is pretty straightforward, but there are a few things to keep in mind ahead of time:
- Most cryptocurrency exchanges are not familiar with Solo 401k plans.
- In addition, not all exchanges accept institutional accounts (which includes 401ks and trusts).
- But don’t worry– we’ve got you covered. At Maverick, we’ve opened many cryptocurrency exchange accounts which we use to help you start investing in cryptocurrency more quickly and easily.
Having said that, to invest in cryptocurrency with your Solo 401k, follow these steps:
1. Open your Solo 401k account
Before you can start investing in the cryptocurrencies of your choice, don’t forget to set up your Solo 401k account.
It’s important to follow this step first because you need the name and EIN of the Solo 401k plan to set up the currency exchange account. If you don’t have it, you can’t complete any associated paperwork.
2. Fund your Solo 401k bank account
Next, fund your new Solo 401k bank account. This can be done with one of several methods, including:
- A contribution
- Rollover from a traditional/pre-tax IRA)
- Or rollover from another qualified plan such as a 401k or 403b
If you don’t yet know the exact amount you’ll be investing, you can always do an initial contribution now and go back to make another once the documents are complete and you’re ready to fund your currency investment.
3. Get set up with a cryptocurrency exchange
We’ve gone through the trouble of getting set up with the best cryptocurrency exchange accounts so you don’t have to go out searching for one.
Once your Solo 401k account is funded, we’ll help set you up and get verified with an exchange account using your Solo 401k account information.
4. Purchase your cryptocurrency
Once you’ve been verified with a relevant cryptocurrency exchange, all that’s left to complete your investment is to process your purchase of currency. The exchange you’ve been approved with automatically debits your account based on your purchase amount.
Once the debit is completed, your selected crypto coins are issued and the transaction is complete.
Invest in the future of currency with a Maverick 401k
Investing in cryptocurrency is a rare opportunity to get in early on not just a new type of technology, but a new form of currency with the potential for exponential long-term growth.
And the best part is, at Maverick, we’ve simplified the process of investing in cryptocurrency. With Maverick, you don’t have to waste your time searching for the best exchanges available. We’ve already done the work for you.
So, if you’re ready to further diversify your portfolio by investing in cryptocurrency with your own Solo 401k, click here to set up an account.
Alternatively, you can contact us here with any questions you may have and we’ll be more than happy to help.