How Do I Buy Ethereum in My IRA?

Cryptocurrencies such as Ethereum and Bitcoin are quickly finding their place in retirement investment portfolios. This article will examine how you can bolster and diversify your retirement savings with an Ethereum IRA. 

Cryptocurrencies (or "crypto" for short) are the hottest new commodities available to investors today. Crypto options didn't exist until recently, and it's alright if you don't understand everything about them.

Arguably the most well-known cryptocurrency is Bitcoin, which first debuted in 2009. Since that time, new cryptocurrencies have been developed, including Ethereum, which is currently the second-most popular cryptocurrency available. 

We are going to cover some of the basic principles of crypto investment for retirement. This article focuses on a specific cryptocurrency investment strategy: an Ethereum IRA.

We'll cover the basics of crypto and how an Ethereum IRA works.

What is Ethereum (ETH)?

Ethereum is a form of cryptocurrency. The designers of cryptocurrency aim to provide a decentralized, secure form of money or a store of value. In this case, decentralized means that a bank, a regulatory agency or the government does not control the money.

There is no "middleman" in crypto. Unlike traditional currency, which requires banks, credit card companies or payment processors to handle transactions, cryptocurrencies such as Ethereum are entirely independent.

Ethereum and other crypto options have significant differences, but all operate on the same basic principle. Cryptocurrencies use something called the blockchain. 

The blockchain is complicated, and a complete explanation would require some pretty advanced computer science and mathematics.

In simple terms, the blockchain is a database, or a place for storing information. Servers, which are large computers that hold enormous amounts of data, keep most of the world's digital databases.

The lack of servers is what makes the blockchain unique. Storing all the information in one place is centralized. The information is essentially under the control of whoever owns the server.

Ethereum stores information across a vast, decentralized network rather than on a server.

Why Should You Invest in ETH?

You may have heard that investing in Ethereum or any cryptocurrency is risky or unsafe. Back in the early days of crypto, this was undoubtedly true.

Early cryptocurrency was extremely volatile and, being a new technology, was operating in a legal grey area.

These days, the crypto market is much more stable. Older cryptocurrencies have had an opportunity to grow and evolve to meet market needs. Ethereum provides a stable value store that is free from censorship and resistant to inflation.

Cryptocurrencies are certainly on the cutting edge, and it's reasonable to assume that their popularity will continue to increase. While the early days of crypto may have created rumors of instability and uncertainty, today's options have evolved into legitimate, trusted investments.

Other benefits specific to Ethereum include a greater degree of versatility in how transactions take place and easy access to unique investment options, such as non-fungible tokens. 

What is Ethereum Used For?

Ethereum, and most cryptocurrencies, are essentially stores of value. Think about cryptocurrencies as digital precious metals. Precious metals are an excellent analogy for crypto; until recently, they were the closest thing to a decentralized currency that existed.

Investors can find the same benefits of precious metals such as gold with cryptocurrencies. Gold is resistant to inflation because there is only a certain amount of gold globally, which constricts its value.

Similarly, there can only be a certain amount of Ethereum. The value of Ethereum is limited much in the same way that the value of gold is limited by how much of the metal is in the earth.

The amount of currency in circulation affects the value of traditional money, such as the dollar. A government can print more dollars, which decreases the overall value of the currency.

No one can print Ethereum. You can only mine it. "Mining" here means doing complicated computer science to add a new link to the blockchain. That process is analogous to mining a piece of gold rather than printing a new dollar bill.

Therefore, an investor can use cryptocurrency in the same way as any physical store of value. Its digital nature does away with the inconveniences of physical investments such as precious metals. 

Investors can exchange a digital currency for traditional currency much more quickly.  

Because Ethereum has gained a reputation for stability and reliability, long-term investments that include Ethereum are becoming more common. You can also use Ethereum to pay for goods and services, as long as whomever you are paying accepts cryptocurrency.

Ethereum vs. Bitcoin

The term "Bitcoin" is often used interchangeably with "cryptocurrency," though the terms haven't been synonymous for about a decade. These days, Bitcoin exists as the oldest public cryptocurrency and a common currency replacement. 

Developers of Ethereum used similar technology to Bitcoin but with different goals. Bitcoin developed to be a true medium of exchange that could replace national, centralized currencies.

Interestingly, Ethereum's designers weren't interested in competing with Bitcoin. They built Ethereum to enable the operation of decentralized applications and smart contracts.

Ethereum's clever engineering and ease of use led to it gaining popularity and eventually competing with Bitcoin.

The flexibility and versatility of Ethereum adds to its value. While Bitcoin has reached the peak of its application and has become a versatile cryptocurrency in its own right, Ethereum continues to evolve the blockchain concept.

New directions make Ethereum attractive to investors. The customizability of Ethereum allows users to find new, innovative uses. The potential of new opportunities is a driving factor behind Ethereum's popularity.

You can certainly find investment options for Bitcoin. In fact, Bitcoin's age and enormous user base make it a promising way to diversify a portfolio.

Different forms of cryptocurrencies have pros and cons, and combining them can be an effective way to get the best of all worlds. 

How Do I Invest in an Ethereum IRA?

It's easy to see why people continue to invest in Ethereum and other cryptocurrencies. The decentralized, inflation-resistant structure of Ethereum coupled with new directions for cryptocurrency makes for a promising investment strategy.

While traditional IRAs do not allow for anything other than traditional investments, such as stocks, mutual funds or bonds, there are options for investing cryptocurrency into your IRA. 

The most common approach is to use a self-directed IRA.

Companies will manage a self-directed IRA in a custodial role. The investor, not the company, decides what investments are included in the IRA, hence "self-directed."

Several companies exist that will help you open a self-directed IRA, exchange your traditional currency for Ethereum and place the cryptocurrency into the IRA. There are usually fees associated with this service, as with most companies that act as custodians.

You can also arrange to open a self-directed IRA with your preferred organization and buy the cryptocurrency separately. There are many cryptocurrency decentralized exchanges (DEX) that you can use to buy Ethereum or other cryptocurrencies yourself.

Overall, Ethereum, Bitcoin and other currently available cryptocurrencies are just the first waves of this fantastic new form of investment. As with many new investment opportunities, time is running out to get in on the ground floor.

Take the time to investigate Ethereum IRAs and decide if cryptocurrency is the right investment for you.