This is the short version of this article by Swan Research, an academic-sounding marketing team for SwanBitcoin.com
This is a summary and extremely lightweight analysis of a 3000-word Bitcoin shilling post. But it’s still an interesting question and it’s not a bad article. But I’m just calling it what it is out of respect for the reader.
Their shortnotes
- You can put Bitcoin in an IRA for tax-deferred gains
- Bitcoin provides protection from the effects of inflation (so does index-fund investing, but arguably to a lesser degree)
- Bitcoin may increase your risk-adjusted returns (this is the point that actually matters for the statistically-driven investors)
My take
The most interesting quote I noticed was this: “Bitcoin’s price has increased by an average of over 100% per year.” That may be true, but is obviously not a guarantee, especially with the rocket ship start it’s had.
It’s still very early in Bitcoin’s life, but maybe not 100% every year early. I would love to be wrong about that.
Fun fact, if you’re a true Bitcoin maximalist, and believe eventually everything can be denominated in Bitcoin, an a single Bitcoin would plateau around $22,076,190 in today’s dollars. That would put the smallest fraction of a Bitcoin (one SAT) at a 22 cents, which actually doesn’t sound as crazy (though still quite high).
There are a million caveats to that number, so think of it as a rough idea. Just like if Bezos decided to pull all of his wealth out of Amazon, he wouldn’t actually be as wealthy, the same tumult would happen in the meantime as whole financial systems shifted away from fiat currencies. So take any of these numbers with 3 pounds of salt.
I personally don’t think $22 million Bitcoin is a crazy idea, but I do believe it’s might take 1–2 lifetimes to reach that number.
The point of putting it in your IRA is exactly that—waiting one of your lifetimes. Assuming you still want to live in the US, it’s in your interest to fully comply now with tax codes. Even if the taxes change, you are more likely to be grandfathered in to old tax rules.
Worst case scenario, you can still self-custody Bitcoin, even in a managed IRA through Swan. Swan allowing self-custodied Bitcoin in an IRA is entirely why I’m giving a whole post to them.
Risk-Adjust Returns
I think this is entirely valid. Famously, a 1% Bitcoin, 99% Cash Portfolio Outperforms Gold, Bonds, S&P 500.
If risk/return is your thing, deeply consider this is a strategy, at least for part of your portfolio.
Bitcoin absolutely trades as a high-risk asset. Even if maximalists believe it’s ultimately the safest, it doesn’t change the fact that it trades as risky. “The market can remain irrational longer than you can remain solvent” which is a great reason not to user leverage on Bitcoin.
Ray Dalio himself crowns uncorrelated bets optimizing risk-adjusted return as the holy grail of investing, so pay attention.
The data speaks for itself.
Put 1% Bitcoin in your portfolio even if you hate risk and hold it for 10 years. This is financial advice.
Retirement Calculator
Play with Swan’s retirement calculator. Make sure you use the advanced version so you can change Bitcoin’s expected return. Otherwise it just gives you a default but doesn’t even tell you the number.
Good luck, be smart, don’t be afraid to buck convention when the obvious path is staring you in the face.
