How To Set Up Your Own Bitcoin/Ethereum IRA

Tyler Durden's picture

Authored by Eric Falkenstein via Falkenblog,

For the past couple of centuries technology empowered the state, put more things under its control. They have ultimate custody of all your financial assets, and custody is nine-tenths of the law. You simply can't hold $1M in financial assets in a form where 'The Man' can grab it if he finds you an enemy of the state, which in many states includes righteous men.

But like so many things the effect is not linear, in that now technology is putting power back in individuals. We can now take classes online, and be evaluated objectively via tests, making Universities less important. We no longer have a handful of news sources, but a spectrum that allows us to choose among vastly different interpretations of the same data. And we have digital currencies, which exploit cryptography innovations aligned with processing power to create ways of assigning credits more efficiently than fiat currency.

The essence of money is not that it is backed by something intrinsically valuable we can hold. Once  we severed its link to gold and silver, it still 'worked.' I would not have predicted that in 1900. Money works because people accept it, and the large network effects of everyone accepting it make it indispensable, because it avoids the 'double coincidence of wants.' Bitcoin was created by geeks who were incented to invest their technical skills into mining and developing the network, and as these highly productive people began to accumulate these assets, they appreciate its value. Since highly productive people appreciate these assets, they are valuable because they can be translated into purchasing the services of such people. Thus, initial coin offerings (ICOs) allow people to fund new businesses focused on blockchain technology because the same people creating these businesses are fine with getting paid in 'tokens', something that would be hard to convince for your average person.

Long term, I see much wealth going off the fiat grid into cryptocurrencies, because as we've seen throughout history, governments eventually run out of other people's money, leaving only expropriation via inflation or outright takings (see 'Fragile by Design'). Anticipating this, getting your money into something the government can't seize is important, and cryptocurrencies allow you to do this. If a government tries to prohibit bitcoin, those with large bitcoin accounts will simply move to someplace that accepts it, like Singapore, and a country filled with those who appreciate and have a lot of bitcoin will tend to prosper. So unless the world governments can enforce a worldwide compact with over a hundred players, bitcoin will succeed, and I'm sure most smart countries will ultimately allow general digital currency use reluctantly, to avoid such a brain drain.

While I love Bitcoin, Ethereum is better because it builds contracts into the same blockchain, which creates greater functionality. If you go to Reddit, you'll see more development in 'Go', a cutting edge software language, in Ethereum projects, and there are already more wikis on GitHub for Ethereum projects than Bitcoin projects, so I'm confident that Ethereum will surpass Bitcoin in market cap someday, especially once they move to proof-of-stake (sometime next year).

Since 2014, one has been able to put Bitcoin into IRAs (see here), though IRAs are so highly regulated, finding how to do this is non-trivial. So I thought I would move some of my 401k into cyber currencies such as Ethereum (you can do BTC too, but I'll use ETH as the example).  Most 401ks and IRAs do not allow you to do this directly, and BitcoinIRA charges 10% to set up a Bitcoin IRA. I don't blame them for charging this much, as it's difficult, and as there's an 80% premium to NAV with the Bitcoin Investment Trust (GBTC), investors are clearly willing to pay extra to avoid the complexities involved in directly owning them (eg, try to explain this to your parents).

The problem is that no IRA custodian can translate USD into ETH the way they can move your USD into a mutual fund. You have set up an account at a cybercurrency exchange to do that, and most exchanges do not handle IRA transactions. The new regulated bitcoin exchanges have very small staffs relative to the number of customers, and so have automated most of their support function. Thus, if you have a question ('how can I buy BTC for my IRA on your exchange?'), you'll get an auto-bot answer using an algorithm that finds the best fit your keywords. These are irrelevant to unorthodox questions, and follow up questions just lead to more pointless autobot answers.

The humans, alas, are rarely better, basically doing the same thing with their meat-based neural nets by looking at their FAQs and copy and pasting answers from there. At Coinbase, if you follow up your question after not hearing anything for 3 days, they will assume you have changed your question, so it moves it to the back of their queue. Thus I had an issue where my question was never answered because every couple of days I would write, 'is anyone there?' which would put me back at the bottom of the queue, and my question was thus unanswered (and funds frozen) for 3 weeks.

It took me a while to find the companies that allow this directly. It's not straightforward, however, as Kingdom Trust clearly stumbled into this capability, and they gave me a bunch of contradictory information, all standard confusion.  I'm sure they and others will figure this all out eventually, but by the time it becomes easy to invest in digital currencies, the incentive will be a lot lower.  So, be patient, it will happen, but just about every step takes at least a day.

Here's how you set up a cybercurrency IRA:

1) Go to Kingdom Trust, an IRA custodian based in Kentucky.  Rollover your IRA/401k there, informing them you plan to hold ETH or BTC in your IRA.

 

2) Set up an account at Genesis (not Gemini). You will need a clear picture of your driver's license you can email them, and a digital photo of a recent utility bill (w/in 3 months).

 

3) Once approved at Genesis, you to open a BitGo account, as this exchange stores your initial wallet after the Genesis trade.

 

4) Ask Kingdom Trust for an "Investment Directive For Digital Currency" form.

 

5) Once you have this form, request a trade at Genesis, so that if you have $100K USD, ask them to buy as much as possible with that (it's called RFQ--request for quote--on the Genesis portal). You will get back a confirmation with the amount of USD paid for X units of ETH. You then 'accept' that on the Genesis site.

 

6) You then immediately fill out the Kingdom Trust "Investment Directive" form, which includes wire instructions to send your IRA money to Genesis's bank account at Silvergate Bank (see here), and your trade terms from Genesis, which includes how many ETHs were bought and for what USD price. You will need to sign the Kingdom Trust Investment Directive digitally, so add the PDF plug-in that allows digital signatures. Do this early in the morning, as even then it takes a day for them to instantiate the wire.

 

7) Kingdom Trust then gives you a wallet address from your BitGo account. You then go your Genesis portal and click on your earlier RFQ trade. Click on the blue box to the left of this, and under Buyer Actions put in the ETH address that Kingdom Trust gives you. Send your ETH to the BitGo wallet address Kingdom Trust gives you.

 

For Bitcoin, this is ultimately put into a multi-sig wallet. For ethereum, they do not have this capability yet but are working on it, so your money stays at an address at BitGo under Kingdom Trust's control.  After that, Genesis is basically out of the picture.

 

Fees: Genesis charges 1.5% for their service, which is implicit in the price paid relative to the market price. You have to pay Kingdom Trust $50 to open the account, $40 for the wire, and a $250 annual fee.

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Yellow_Snow's picture

Good Job Tyler's...  Keep up the educational materials.

Killtruck's picture

But where do I find a rather untrustworthy digital boat that might sink and take all of my savings with it?

The central planners's picture

Dont forget the digital cow. Classic!

VD's picture

oh my the old farts getting herded into Tulipcoins so hard -- the fleecing will truly be EPIC!

InjectTheVenom's picture

Hmmm...let's see...would you rather :

>>>>  hold BTC/ETH in an IRA   or

>>>>  lick the scum from between the toes of a Nigerian marathon runner.

Shitonya Serfs's picture

Things I trust more than cypto-IRAs

Bill Clinton's Pinterest plans for a Cigar Humidor
An Illegal alien's recommendation for a car seat
A Black kid's directions to a library
A bum's advice on which toothbrush to buy
An Antifa's definition of a Fascist
Obama's referral to someone good at Photoshop
Having Hillary teach my kid how to drive

DWD-MOVIE's picture

I’m making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do… http://disq.us/url?url=http%3A%2F%2Fwww.jobproplan.com%3A68UoF1LgzM-Yo3S...

valjoux7750's picture

Damn, I only made 3500 percent over the past three months, gotta love the tulips, bitchez!!

Theta_Burn's picture

A retirement account with bit and eth.. marone..

Another smashing idea employing thousands to get you signed up..or is it in?

Anyone seen my myRA? aren't these bitcoinz suppose to free us all from the government eggyolk?

All I see is .gov herding..

tmosley's picture

You should take the blinders off.

The Cooler King's picture

You should put them on so that you don't get overtaken by Rosemont in the SANTA ANITA HANDICAP in the final strides because you're BLIND IN ONE EYE.

 

https://www.youtube.com/watch?v=eruR4awKFuQ

tmosley's picture

Still don't speak chicken cluck.

SoilMyselfRotten's picture

Only 7 steps to invest? I'm not sure they will be able to handle the traffic.

Theta_Burn's picture

After the 3rd/4th fork it might.

The new, improved, and .gov sanctioned sacmanGold coin will have all this worked out however.

Son of Captain Nemo's picture

"But where do I find a rather untrustworthy digital boat that might sink and take all of my savings with it?"

Well said indeed!

The central planners's picture

If we are going to be in a new paradigm of economic growth then cryptos makes sense but we are going to dark ages. At that point it what does matter if bitcoin reaches 1 million dollars if dollar are worthless.

Yellow_Snow's picture

I want my Lambo and Trophy wife before SHTF...

1stepcloser's picture

Get a job a Goldman sucks...its quicker

tmosley's picture

They are obsolete.

Do try to keep up.

tmosley's picture

Peanutz don't like or want education.

RightEdge's picture

Uneducated perhaps, but they do make perfect crypto Gartmans.

timetraveler's picture

Best way to do this would be a Roth IRA to avoid taxes when you withdrawal your millions. Each Bitcoin Could Be Worth $619,047 in 10 Years: Forbes Contributor https://cointelegraph.com/news/each-bitcoin-could-be-worth-619047-in-10-...

fuckstar's picture

This is going to piss off Fauxcuntus. She's counting on raiding all assets left after the Great Bailout Mortgage Robbery. Enjoy your 6 year meltdown, madam traitor.

WeekendAtBernankes's picture

If you believe in the cryptos enough to hold to 59.5 then hodl in your crypto wallet. Save the IRA for the boring but stable.

Panafrican Funktron Robot's picture

"Save the IRA for the boring but stable"

Like what?  Stocks?  Bonds?  Given record corporate and governmental debt, how are these stable?

Juggernaut x2's picture

If you can't stand over it with your rifle you don't own it.

hedgeless_horseman's picture

 

If you can stand over it with your rifle, the water is too shallow.

83_vf_1100_c's picture

  The approved method is to pitch your tent 20 yds back in tree line on the opposite shore. Lay your rifle on a fallen log (stable rest and protection) and if a boat with scuba gear shows, defend your stash. If you avoid hitting the boat, you increased your assets.

tmosley's picture

If it is without form, neither the cleverest thief may steal it, nor the most powerful government learn of its existance.

Yellow_Snow's picture

Here come the wheelchairs and walkers patrol...

Nobodys Home's picture

Git outter my way sonny! That ain't my dementia talkin. It's Bitcoin!

Latitude25's picture

How to set up your retirement fund that will be totally worthless.  FIFY

In.Sip.ient's picture

Unless you know how to collect interest in

block chain currencies, I'm not sure what

the point is???

 

It is much simpler and SAFER to keep your block

chain currencies in one or more digital wallets

on your PC and associated storage media...

 

Theta_Burn's picture

Many operators will be standing by to assist you with the tough investment decisions..

Grandad Grumps's picture

If you think cryptocurrencies are safe from "the man", then you are really, really, really stupid.

Weirdly's picture

Why are you so afraid?  Grow a pair and tell evil men to fuck off.  Better yet, keep using reserve notes and just enjoy the lovely slow painful penetration the owners of the Federal Reserve continue to give you.  

izzee's picture

I  printed out my Keys like they told me...have a paper trail.

I put it in a "wallet" on a thumb drive, like they told me.  But I still don't SEE it.

oddjob's picture

Why is the BitCoin always depicted Gold in colour?

Latitude25's picture

To associate it with a much better form of money.  It's a psy op brought to you by ZH.

Son of Captain Nemo's picture

Because the perfect assholes conning you into buying it want you to believe "IT IS" GOLD!

LONG ON PRINTING PRESSES THAT JANET YELLEN HAS AT HER DISPOSAL "THAT YOU WILL NEVER HAVE" IN MINING IT!!!

tmosley's picture

Because its an ebbil conspiracy by duh illmanaty.

DC Beastie Boy's picture

Whichever Tyler wrote this can suck a big fat hairy bag of sweaty dicks.

Fuck the IRA , wtf are you smoking? 

You can decentralize everything and keep it yourself.  In your wallet, on paper wallet, or whatever the fuck you want.

 

oddjob's picture

Hurry up and enter into one more contract with the Government.

Son of Captain Nemo's picture

Is it just me, or is the first page of comment(s) to this moar then intellectually foul smelling read littered with the best sarcasm "darts" on the matter of cryptocurrency we've seen in a long time?!!!

Grave's picture

notice how they are stuffing banksters shitereum into every bitcoin article, to confuse sheeple.
there's only one blockchain, and bitcoin is its name.

WillyGroper's picture

"You will need a clear picture of your driver's license you can email them, and a digital photo of a recent utility bill (w/in 3 months)."

that's real smart.

email is so secure & your DL number matters not.

WTF