Taking the leap and investing in cryptocurrency can be one of the most rewarding experiences you can ever make. Crypto is among the hottest assets you can invest your money in today, with many crypto investors making unfathomable gains in just the past year.

That said, it’s not too late to get started, as the prospects for crypto seem really bright.

As a beginner, one of the best ways to invest in crypto is through a cryptocurrency IRA. A cryptocurrency IRA is a self-directed retirement account (SDIRA) that works much like a traditional or Roth IRA, except that you can hold different digital currencies on it. If you don’t know where to start with investing in crypto, reach out to professionals from Viva Capital for help.

In a way, your SDIRA will allow you to diversify your portfolio while still enjoying the same tax benefits as those you’d get from investing in bonds or stocks.

With that out the way, the process of opening a crypto IRA is quick, straightforward, and friendly to newbies like you. Here are five key steps you should follow to open your SDIRA:

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1. Open an Account with Your Preferred IRA Provider

The first step of investing in crypto through an IRA is finding an IRA provider, also known as a custodian or trustee. Basically, a custodian’s job is to host your IRA and make sure you’re following all the necessary regulations by regularly reporting to the IRS.

You will handle most of the investing on your account but there are exceptions where your custodian can conduct trading on your behalf.

Now, there are numerous self-directed IRA providers currently in the market. To find the right one for your needs, you want to check essential things like:

  • Account Fees: these could include account opening fees, transactions fees, trading fees, account management fees, storage levy, and so on. Note that providers usually charge a combination of some of these fees and not all of them.
  • Minimum opening balance: this is the amount you’ll need to deposit in your account to activate it and start investing.
  • Supported cryptocurrencies: you want to confirm whether the cryptocurrency IRA can store different kinds of crypto.
  • Trading platforms: some providers have affiliations with trading platforms, otherwise known as exchanges. Depending on your account custodian, you may be limited to provided exchanges or choose the exchange you want.

Once you’ve chosen a cryptocurrency IRA provider, the actual process of opening an account is pretty simple. You’ll just need to provide a couple of personal details, i.e., your name, social security number, address, and banking information.

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2. Transfer Money Into Your New Crypto IRA Account

Once the registration process is done, the next step is to load money into your account. The easiest and most direct is linking your bank account to your IRA. Note that different providers offer other options that may be more convenient for you.

At this point, you want to keep two things in mind. One is the minimum you need to deposit to start investing, usually specified by the account provider. The second thing you’ll have to consider is the cryptocurrency you intend to buy and, of course, how much of it you want.

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3. Open an LLC (This is Optional)

You can invest in Bitcoin or any other cryptocurrency directly with your self-directed IRA if your provider allows it. The other option is to open a limited liability company to handle your crypto trading.

LLCs generally offer tax benefits, better asset protection, and better credibility. So, if you opt to go with an LLC, you’ll need to open and register what’s known as a single-member LLC within your self-directed IRA.

As per IRS specifications, all the expenses and income associated with the crypto assets will flow through the IRA’s LLC. Bitcoin, among other cryptos, is considered property for federal tax purposes by the IRS. However, since your retirement account owns the crypto, any of the gains you make are tax-advantaged.

The LLC will use the money from the IRA to open a business checking account (an IRA LLC is also called a “checkbook IRA”). The checkbook gives you total control of your transactions (checkbook control), which you can make easy by simply writing a check or wiring money.

Remember, the money in the IRA LLC’s business checking account is exclusively for investing in digital assets like cryptocurrencies.

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4. Pick Your Trading or Crypto Exchange Platform

Next, you will need to research and find the ideal cryptocurrency exchange platform for you. Alternatively, you can just choose to go with the platform your IRA provider recommends.

Once that is done, open an account on the cryptocurrency exchange in the name and tax number of your IRA LLC. Besides exchange platforms, you can also purchase crypto and other digital assets via brokers or by investing in a fund that holds various digital currencies through private placement.

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5. Buy Your Preferred Digital Currency into Your IRA

The last step is to buy and store your cryptocurrency of choice into your IRA. Make sure that you do enough research on the viability of a cryptocurrency before buying it into your IRA.

Even if cryptocurrencies are known to be volatile, you can easily get ahead of things by doing enough research on them. You don’t want your retirement to start depreciating immediately after investing in crypto.

Looking to Invest in Cryptocurrency Through an IRA? The Process is Easy for Beginners

The top cryptocurrencies have seen incredible gains already this year, making them an excellent addition to your IRA and a great way to diversify your portfolio. In fact, as of October 2022, the total value of all cryptocurrencies was above $2.5 trillion, with the market capitalization of Bitcoin, the biggest cryptocurrency, reaching almost $1.2 trillion.

So why not get in on the action today by taking the plunge and investing in crypto via an individual retirement account. The five steps highlighted in this article are sure to get you started in the right direction.