If you’ve been keeping tabs on financial news, you may have heard about the tremendous Bitcoin surge that’s swept the blockchain landscape. This sudden influx of value has several investors pursuing cryptocurrency and implementing it into their retirement portfolio. Subsequently, you may be wondering if you should take advantage of this potentially opportune moment and grow your retirement with crypto. We’re laying it all bare so you can determine if this is a venture that aligns with your ambitions.
The outcome of the 2024 presidential election has served as a colossal catalyst for the Bitcoin surge. This may largely be attributed to Donald Trump’s cryptocurrency-related promises. During his campaign, he declared his intention to make the United States 'the crypto capital of the world.' Furthermore, he pledged to appoint a chairperson who advocates for cryptocurrency to the U.S. Securities and Exchange Commission (SEC).
There’s been talk of the creation of a Bitcoin presidential advisory council, along with a promise to prevent the U.S. Federal Reserve from developing its own digital currency. This has revived an enthusiasm for crypto that may have been thwarted in response to the so-called crypto winter that concluded in 2022. Nonetheless, this is just the tip of the Bitcoin surge iceberg. Other elements played a part in increasing cryptocurrency’s demand, which may be important to consider going forward.
January of 2024 welcomed a regulatory approval by the SEC for cryptocurrency exchange-traded funds (ETFs). This includes spot Bitcoin EFTs, which undoubtedly aided in the Bitcoin surge. The proof lies in the trade value that surfaced by March 2024, as Bitcoin’s price was around $70,000. Now, BlackRock’s iShares Bitcoin Trust has received over $40 billion in inflows. This has become the largest EFT to be inaugurated in the past decade.
In April of 2024, a Bitcoin halving event ensued. This typically occurs every four years, or about every 210,000 blocks mined. The Bitcoin network generally rewards the investing community by having the newly mined Bitcoin blocks cut in half. This is built into code as part of its deflationary monetary policy, which helps control inflation and keeps the total supply of Bitcoin at 21 million. Simultaneously, this attempts to minimize Bitcoin scarcity.
Historically, Bitcoin halvings are usually followed by an increase in price. Yet, as the reward decreases, miners become more reliant on transaction fees for their incoming revenue. This has the potential to modify mining, and in return investing strategies, as well as the potential to cause a change of equipment.
The final Bitcoin is slated to be mined around the year 2140. Once this approaches, miners will only be able to accrue compensation through transaction fees. With this mind, consulting a financial advisor may deem beneficial regarding constructing a plan that coincides with your retirement goals. (Particularly if your plan is to designate beneficiaries to your retirement account.)
Since Bitcoin is now recognized by the Securities and Exchange Commission, and the expectations of a possibly more satisfactory regulatory environment have emerged, market confidence has bloomed. Investors are anticipating a transparent, progressive crypto regulation that is unlike anything before. A price increase in Bitcoin has been predicted, which is contributing to the swell of cryptocurrency purchases. The excess purchases then continue to drive up the price even further.
What’s more, there have been proposed tax changes which can also positively impact the Bitcoin surge. Maximum capital gains tax rates have been promised to be lowered. In turn, this grants investors the chance to safekeep a substantial portion of their profits from cryptocurrency trades. Conversations are circulating about eliminating capital gains taxes on crypto that’s been made in America. If implemented, there would likely be another Bitcoin surge as Bitcoin is an American digital currency.
While cryptocurrency’s market generally remains volatile, this does offer the possibility of returns immensely exceeding their original buying price. The current lower interest rates have given borrowing power to a broader audience. Successively, this has also seemingly boosted the Bitcoin surge.
When it comes time to cultivate the ideal retirement portfolio, allocating retirement savings across a diversified spread of investments is typically considered best practice. Therefore, as an alternative asset that’s uncorrelated to Wall Street products, Bitcoin can potentially sprinkle balance into a retirement portfolio, thus mitigating overall risk.
In the past year alone, Bitcoin has delivered a 134.87% return and is reported to be one of the best-performing asset classes for 8 out of the past 11 years. This depicts a pattern of Bitcoin accumulating a significant price appreciation, which is the objective for nearly every individual saving for their retirement.
We hope these forementioned points help you reflect on whether jumping the Bitcoin bandwagon is in your best interest. While articles and educational materials can provide insight, the authors do not have knowledge of your fiscal aspirations or bank statements. Before embarking on any investment opportunity, it’s strongly encouraged that you perform through due diligence and speak with a financial advisor.
Self-Directed Checkbook IRAs are impressive vehicles for transaction-heavy investments such as Bitcoin. If you’ve been vying to take the reins on your retirement, these accounts let you perform your everyday transactions without the involvement of your custodian. Contact Broad Financial today to learn more.
Disclaimer: Broad Financial LLC does not provide legal, tax, or investment advice. Please consult with your tax or legal advisor before making investment decisions.
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