Congratulations on taking your Self-Directed account into the 21st century! The IRS allows you to take your hard-earned dollars and retire with bitcoin and other digital assets. You should be commended and looking for ways to make the most of your forward-thinking vision and execution.
In case you didn’t know, fiat currency is legal tender whose value is backed by the government that issued it. The U.S. dollar is fiat money, as are the euro and many other major world currencies. The first step is to exchange dollars from your IRA or Solo 401(k) into bitcoins & corresponding keys that represent the store of value using blockchain technologies. Then, you’ll own a digital asset or cryptocurrency directly, held in the name of your Rocket Dollar Self-Directed account.
As many of us believe that this store-of-value will gain a large share of the global monetary system, we are content to buy & hold these assets for long-term value appreciation. For many in the space, this simple strategy has become known as HODL (a famous misspelling of the word hold used by crypto natives).
When to HODL
The highly volatile nature of cryptocurrencies has made it very difficult to actively trade the assets. Many technologists and passive investors have admittedly stopped trading. These investors choose to “HODL” their positions for the long haul.
Beyond simple cost averaging into a position, I agree with the HODL strategy. Most investors are using this strategy to diversify their portfolios. It offers a rather simple and tangible investment model.
However, this does present some portfolio construction challenges and limitations that any engaged investor would want answers to try and address:
Servicing Costs: If using a third-party storage solution, what will my ongoing costs be? Depending on your Wallet or Custody provider, you may pay fees for storage and movement of your assets. There are many choices (including self-storage alleviate this problem) simply it is something to consider and ensure you understand before transacting.
Opportunity Costs: Uncertainty around market evolution and regulatory environment do not ensure long-term gains. We all foresee in cryptocurrency gaining value. Ultimately, there could be significant value appreciation that you are not actively gaining beyond the market rate value of the coin.
Crypto Lending Made Easy
How do you add value to your new investment?
The answer: By lending your crypto out and earning yield back into your retirement $$$
A growing eco-system of crypto-based lenders are offering a variety of products. The shared opportunity is an active yield generating on top of your long term HODL. Also, these systems are employing many traditional banking structures leveraged by the offering lender.
Put simply, they are taking your deposits of coins to lend out, leverage against, and create transactions for gains. Then, your account shares in the gains. With adequate deposits or an active loan, your cryptocurrency can start earning back active returns for the account.
At Rocket Dollar, our customers have worked with a few firms in the space: