If you understand why Bitcoin is an asset you can hold for the long term, you may also be wondering how to take advantage of retirement tax structures to reduce your tax expenses. There are many different ways to approach holding Bitcoin in an IRA, and as with everything in Bitcoin, each has its trade-offs. Let's take a look at how different Bitcoin IRA methods compare.
Sovereignty and appreciation
Before we can cover these approaches to retirement savings with Bitcoin, you need to understand the two most important benefits you get by holding Bitcoin: financial sovereignty and purchasing power. That is, the freedom you gain from it Hold private keys To bearer digital assets located outside the traditional financial system, and appreciation of that asset as measured by paper value.
The four most popular approaches to holding your bitcoin in an IRA have different trade-offs related to these two benefits:
|
project |
sovereignty |
Rising prices |
|
Bitcoin Futures ETF |
Lack of control over the keys |
Indirect price exposure |
|
Spot Bitcoin ETF |
There is no control over the keys |
Mostly direct price exposure |
|
Bitcoin IRA without master control |
Lack of control over the keys |
Direct price exposure |
|
Bitcoin IRA with master control |
Complete control of the keys |
Direct price exposure |
Beyond these two factors, the other differences are a bit more subtle. Let's take a closer look.
Four ways to keep Bitcoin in an IRA
Bitcoin Futures ETFs at IRA Brokerage (BITO)
One previously popular way to get exposure to Bitcoin with minimal effort was through futures ETFs such as the ProShares Bitcoin Strategy ETF (BITO). This fund intends to offer investors managed exposure to Bitcoin futures contracts. Futures are financial contracts that require interested parties to make a transaction at a specific date and price in the future. You don't get any master control – futures ETFs like BITO don't even hold physical bitcoin itself. BITO is still available, but its popularity has declined since the launch of spot Bitcoin ETFs in 2024.
Bitcoin Spot ETF in IRA Brokerage (IBIT, FBTC, GBTC, etc.)
Bitcoin ETFs were launched in 2024, giving investors access to a Bitcoin proxy financial product with much more direct exposure to the price of Bitcoin than previous futures and trust products. Like Bitcoin Trusts and Futures ETFs, you do not have primary control over any actual Bitcoin with these products. However, spot ETFs themselves hold actual Bitcoin with custodians such as Coinbase, Fidelity, and Gemini. They track the price of Bitcoin closely because authorized participants have the right to create and redeem shares of the ETF, keeping the price in line with its net asset value.
Bitcoin IRAs without master control (iTrust Capital, BitcoinIRA)
Many Bitcoin IRA products allow you to buy real bitcoin but offer no master control, such as iTrust Capital, BitcoinIRA, Swan Bitcoin IRA, and others. Like Bitcoin proxy products, these products provide no control over your private keys. The biggest benefit is that you get direct exposure to the price of Bitcoin because the actual Bitcoin is held on your behalf. In these products, the bitcoin is owned by you, and in some cases it is possible to send it in kind if you change IRA providers. You may also have more flexibility with trading options than with spot ETFs.
Bitcoin IRAs with Master Control (Unchained IRA, Choice)
Key control is important for various reasons, but it is rooted in Bitcoin principles more broadly. Bitcoin allows you as an individual to preserve your wealth in a way that was not possible before. If you don't hold your keys, you ultimately own the Bitcoin IOU, and the key holder can make arbitrary decisions like changing the associated fees, recharging, and more. Another element that is often overlooked is that the companies that hold your keys can fail; You become an unsecured creditor if the company becomes insolvent.
There are Bitcoin IRA products on the market that provide complete control over your Bitcoin keys and direct exposure to the price movement of the underlying asset. With these products, you can eliminate single points of failure by controlling the actual Bitcoin keys held in a multi-signature wallet. One such product is the Unchained IRA.
Bitcoin IRA Comparison: Spot ETF vs. Non-Key Control IRAs vs. Key Control IRAs
comfort
Holding a bitcoin proxy such as an exchange-traded fund (ETF) in your pre-existing IRA will be the easiest way to get exposure to the price of bitcoin. It's as simple as typing in the ticker code and purchasing the product, as long as your brokerage firm offers it. If you're new to Bitcoin and want to experiment with unfolding your portfolio, spot ETFs also allow you to easily trade in and out of your position at will – albeit only during market hours in most cases. Despite the number of trade-offs these products have, they win this category.
No-key Bitcoin IRA products are the clear runner-up for convenience as you don't have to think about key management practices while still having direct exposure to the Bitcoin price.
Price correlation
If you hold a Bitcoin proxy such as an ETF in a brokerage account, you are not holding real Bitcoin, but you are still holding a well-designed financial instrument that is well correlated to the price of Bitcoin with minimal slippage. However, spot ETFs are not perfect – nothing will be better than holding Bitcoin itself when it comes to price correlation.
Whether you hold your bitcoin keys or not, products that allow you to hold actual bitcoin will track the price of the underlying asset, which is what most investors prefer.
Counterparty risk
Products such as spot ETFs and futures, as well as non-master control IRAs, do not provide you with the benefit of master control, which means you are exposing your wealth to many layers of counterparty risk. For spot ETFs, for example, you trust the custodian (possibly Coinbase, Fidelity, or Gemini), the issuer of the ETF itself, and the broker where you have a retirement account.
Another side effect of these proxy products and non-control switch IRAs is that you may eventually have to sell and distribute in US dollars. With Bitcoin IRAs with principal control, you can withdraw real bitcoin from your account without penalty at retirement age. As the world transitions to the Bitcoin standard, you may not need or want to sell back to fiat currencies when the time comes.
The old adage remains true: “Not your keys, not your bitcoin.” The Bitcoin protocol was created to give you the opportunity to control your wealth. Controlling your keys reduces counterparty risk and eliminates single points of failure.
it costs
The cost range across all Bitcoin IRA products is broad, and so is the value you receive.
Spot ETF products are relatively affordable – their fees are as low as 0.2%, which is much better than the expensive 1-2% you would have paid for the convenience of GBTC or BITO before spot ETFs were available. However, annual fees on spot ETFs can reach tens of thousands of dollars, depending on your holdings and the rise in Bitcoin value.
Among Bitcoin IRAs that do not offer principal control, iTrust Capital is currently the most expensive way to hold Bitcoin in an IRA. On the other hand, competitors like BitcoinIRA are a bit more vague about their fees, making it unclear how they compare on this front.
The Unchained IRA has a higher one-time setup fee, but lower annual fees and trading fees, resulting in much lower fees over time.
Key takeaways
The only way you can hold bitcoin in an IRA and still get the two features it was created for, namely limited supply and master control, is to hold bitcoin in a master control Bitcoin IRA.
While a key control IRA may require more for a client to learn how to properly hold Bitcoin keys, we believe it is time to receive a basic education in Bitcoin custody. Multisig, in particular, eliminates single points of failure and trusted third parties.
Spot ETFs held in a brokerage account can also be a suitable option if you want immediate exposure to Bitcoin while you learn more about the technology and the importance of principal control. But you should know that it can be costly in the long term, especially if the price of Bitcoin rises significantly over the coming years, exposing you to multiple layers of counterparty risk.
Setup, Bitcoin IRA, and Beyond
If you already own a Bitcoin IRA proxy product at a traditional financial institution, we make it easy for you to transition to actual Bitcoin with master control through an Unchained IRA. And if you already have a physical Bitcoin IRA, we can even do in-kind rollovers if your provider supports withdrawals.
We're also your partner for Concierge Onboarding and beyond, so you can get help from Bitcoin experts on your self-custody journey – no matter where it takes you. Anyone can learn how to keep their Bitcoin keys secure with the help of our concierge team. Book a free consultation for more details.
This article is provided for educational purposes only and should not be relied upon as tax or investment advice. Unchained makes no representations regarding the tax consequences or suitability of investing in any structure described herein, and all such questions should be directed to a tax or financial advisor of your choice.
Originally published on Unrestricted.com.
Unchained Capital is the official US collaborative custody partner of Bitcoin Magazine and a primary sponsor of related content published through Bitcoin Magazine. For more information about the services offered, custody products, and the relationship between Unchained and Bitcoin Magazine, please visit the website Our Location.
