Much of the attention surrounding Ethereum and other cryptocurrencies focuses on their fast price increases and the moves of day traders and speculators. However, these new forms of currency and transactions provide investors with an attractive option for retirement savings. These currencies are becoming more and more mainstream, with various retailers now accepting them as payment methods, and various financial institutions looking to get into trading and profiting from them.
Differences between Ethereum and Bitcoin
There are some fundamental differences between Ethereum and Bitcoin. At its core, Bitcoin is a currency, whereas Ethereum functions as a broader ledger or blockchain technology. Many cryptocurrency experts describe the technology structure of Ethereum to be more robust than Bitcoin and able to function as a decentralized application platform. The actual cryptocurrency coin is known as “Ether” and is part of the ledger technology of Ethereum.
The current price of Ethereum as of March 1, 2018 is around $855 per coin, compared to around $10,858 for Bitcoin. Some investors feel this pricing disparity gives Ethereum more room to reach new highs, although many others also see massive potential for Bitcoin, with some predicting prices of $1 million per Bitcoin in the future. Both cryptocurrencies can be purchased fractionally, so an investor could put just $50 into a cryptocurrency account once a month, which (at current prices) would buy about 15% of an Ethereum token. This allows even modest savers to accumulate the new cryptocurrencies incrementally and gain access to their potentially explosive gains.
Retirement Investing with Ethereum
Investors can create an Individual Retirement Account (IRA) that is purpose-built for investing in Ethereum. These IRAs are treated the same as any IRA offered by Fidelity or Vanguard (or any other brokerage) in terms of tax advantages and contribution limits. The investor simply needs to find a reputable “custodian” for the account, which is a firm that specializes in cryptocurrency IRAs and understands the unique safeguards necessary for such accounts.
Choosing the right custodian is important because the firm will handle the security aspects of the Ethereum account, including keeping the cryptographic “key” safe and meeting all of the necessary regulatory requirements.
Benefits of an Ethereum IRA
An IRA funded with Ethereum provides investors with exposure to a completely new type of currency, one that isn’t tied to a single country or centralized banking system. Ethereum is a truly global investment, so it’s not dependent on the US dollar and can be largely immune to fluctuations in stock markets.
Ethereum IRAs can be funded over time (similar to other retirement accounts) and the investor is simply hoping for a steady long-term gain in the cryptocurrency’s value. Investors who are looking to roll over their 401(k) plans after they leave an employer can now put some or all of those funds into a digital currency IRA that invests in Ethereum as a way to instantly diversify their holdings. This rollover functions the same as one where a 401(k) is moved to a traditional brokerage IRA, and simply requires completing paperwork for the new cryptocurrency custodian and setting up the Ethereum IRA.