Bitcoins Allowed For IRAs Via Second Market’s Bitcoin Investment Trust And Why You’d Be Stupid To Actually Use It For Retirement
For BIT’s services, 1.5% in fees are charged at both ends with a 2% annual fee billed for administration and safekeeping. As an example, investing the minimum amount of $25,000 for a total of one calendar year will result in 5% fees. Comparatively, buying $25,000 in Bitcoin from Coinbase allows an investor to have liquidity now instead of next March, and assuming the same one year investment: Only 2% + $0.30 in fees. Seeing as how the BIT has attracted over $65 million in investments, I must conclude that rational investors are investing with Second Market not because of Second Market’s competitive rates but because of their promise for regulatory compliance. ”Sophisticated” investors are paying an additional premium to have their posteriors covered not from hacks, but from government intervention.
To continue my above example, I would like to point out that Coinbase’s security measures for their and their users’ Bitcoins are equally if not more secure than the BIT’s. Investors, hopefully, are reading enough about Bitcoin, before sinking five figures into it, to figure out that Bitcoin security is often better left to your own devices as opposed to a company’s servers. Buying Bitcoins and securing them yourself is simple enough given its rewards and best of all does not have a 2% annual fee. For any person considering using Fidelity or Second Market’s Bitcoin Investment Trust I must ask you to truly consider what it is you’re doing. A 2% annual fee will eat at your initial investment a significant percentage amount no matter what happens with the exchange rate. For one year or until Bitcoin is legally defined, an added 2% premium for regulatory compliance may be worth it; however, 2% every year for several decades will add up. Bitcoin is not about putting more money into the pockets of the already-uber-rich. Any current investor in Second Market should really take the minimum of $500 they throw away every year to Second Market and use it to buy themselves the time (A few hours at max, so consider it a $250/hour consulting gig) in their busy investor lives to learn how to secure their own Bitcoins better than BIT ever could and for free.
Let me be perfectly clear, the only service that Second Market has provided to the Bitcoin community is allowing the meek to take a compliance-assured method of investing in Bitcoin. Until such time that the United States government opines as to Bitcoin’s classification and tax ramifications, it makes some sense for large investors that want to have a (compliance) safe position in Bitcoin to pay Second Market 2% every year. However, if said investor really believes in the long-term viability of Bitcoin and wants to remain on the IRS’s good side, as soon as the IRS makes it clear how personally stored Bitcoins will be taxed, smart investors will take their money out of Second Market and back into, well, their own money. In the form of Bitcoin, where annual fees are but a specter of an old, creaky, financial system.
