The Historical Significance of Gold in Economics and Politics

Gold has long played a pivotal role in the realms of economics and politics, exerting considerable influence over human financial activity and shaping the course of economic systems. What sets gold apart is its remarkable versatility and stability, both of which have allowed it to withstand countless upheavals and adapt to social changes. The value of gold extends beyond its practical uses; it has become an indispensable tool in global trade and currency exchange, forming the foundation of the modern financial landscape.

In the 19th century, gold held unrivaled status as the backbone of the global monetary system. Nations relied on the gold standard, which pegged the value of their currencies to a fixed amount of gold. However, the onset of the Great Depression and the devastation wrought by World War I ushered in significant inflationary catalysts. In response, economies gradually abandoned the gold standard over several decades.

This transition reached its culmination in 1971 when the Federal Reserve could no longer exchange US dollars for gold. Five years later, the gold standard was officially abandoned, and gold entered a new era as a free asset, suiting the needs of a rapidly evolving global economy.

Today, gold remains a dependable store of value with a robust and well-established market. Its reputation as a safe investment is built on centuries worth of proof through countless cycles of prosperity and economic upheavals. Gold possesses high liquidity and can be easily traded or sold in various forms, including bars, coins, jewelry, and representative instruments.

The Battle of Uncorrelated Assets: Gold vs bitcoin

In the realm of retirement investments, gold stands as an uncorrelated asset, displaying an average annual return that consistently keeps pace with inflation. During times of economic uncertainty, investors often flock to gold, seeking its reputation as a reliable store of value and its non-correlation with stocks, making it an ideal choice in market downturns.

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However, the ever-evolving landscape of monetary technology has presented investors with a new option: bitcoin. Though a relatively new asset, bitcoin has already been hailed as “digital gold” due to its many shared characteristics with gold. Like gold, bitcoin boasts a finite supply, positioning it as a potential store of value.

What sets bitcoin apart is its unique value proposition in the digital age. Unlike physical gold, bitcoin can be transferred digitally, making it the world’s first digital bearer asset. Achieving this feat required a convergence of economic design, cryptography, and decentralized networks.

For investors seeking the perfect portfolio, a balance of assets that aligns with their risk preferences and the economic climate is an ever-elusive target. Both individual investors and professional fund managers continuously search for new avenues for growth and diversification. Retirees, in particular, desire investments that provide wealth preservation, stability, and continued income by capitalizing on the opportunities of the times.

Composing the ideal mix of less risky, stable assets and higher-risk growth assets has always posed a challenge, even for the most experienced financial planners. Some experts believe that bitcoin can serve as an excellent addition to a retirement portfolio, offering diversification and serving as a hedge against systemic risks, just like gold.

bitcoin IRAs: Exposure to the Best Performing Asset of 2023

Another method for replicating existing investment products is through the creation of bitcoin IRAs. The IRS categorizes bitcoin and other cryptocurrencies in retirement accounts as property. While government regulations prevent Roth IRAs from holding “coins” and “collectibles,” they do not explicitly cover bitcoin.

According to the most recent reports from NYDIG, bitcoin tops the list of 2023 returns based on asset class. As of October 6, 2023, it has witnessed a staggering 63.3% year-to-date increase, outperforming US large caps, commodities, cash, and gold. With the countdown to its next halving in April 2024, many investors are considering adding bitcoin to their retirement accounts.

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Some IRA providers already offer cryptocurrency investments in the form of cryptocurrency IRAs, particularly bitcoin IRAs. A bitcoin IRA functions similarly to a traditional self-directed IRA (SDIRA), providing investors with convenience, security, and ease. Instead of directly investing in bitcoin and handling custody, bitcoin IRAs simplify the process.

In a bitcoin IRA, individuals can buy and sell bitcoin within a tax-advantaged retirement account. This unique offering allows retirees to maintain traditional retirement accounts while having a separate account that explores novel currencies like bitcoin.

Why Add bitcoin IRAs to Your Portfolio?

Plenty of bitcoin advocates tout it as the “digital gold,” asserting that bitcoin can serve as a reliable store of value in the digital realm. Based on this viewpoint, bitcoin investments analogous to gold products are being created. bitcoin products are structured in a manner similar to gold ETFs, with their underlying assets being physical gold. bitcoin products offer exposure through funds traded on stock exchanges.

Efforts to gain approval for bitcoin ETFs have gained traction in recent years, with major asset managers such as BlackRock and Fidelity expressing optimism. A DC court ruling on Grayscale’s bitcoin ETF application, which invalidated the SEC’s argument for denying the product, has been seen as a turning point for the industry.

Proponents of bitcoin ETFs eagerly await the SEC’s response, as approvals could potentially lead to increased demand and the opening of floodgates. If bitcoin ETFs become a reality, it will mark a significant milestone for the industry.

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Simplifying Retirement Planning with a bitcoin IRA

Despite being a relatively new asset, bitcoin has displayed impressive performance in 2023. It has maintained a narrow trading range, defying intense external pressures and exhibiting resistance to significant volatility and breakouts in either direction.

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Retirees and individuals planning for retirement who are interested in adding riskier assets to their portfolios and embracing the changing times can consider incorporating bitcoin into their retirement investments. They need not dive into the technical intricacies of safely storing bitcoin; instead, they can set up bitcoin IRAs as traditional or Roth accounts.

Roth bitcoin IRAs allow tax-free withdrawals in retirement, while traditional bitcoin IRAs offer tax-deferred growth. Retirees in higher tax brackets can leverage the benefits of traditional bitcoin IRAs.

Why choose bitcoin IRAs over purchasing and storing bitcoin directly? bitcoin IRAs enable easy incorporation into estate planning, providing a distinct advantage over traditional retirement accounts. Platforms like Swan bitcoin IRA offer enterprise-grade custody with insurance coverage, ensuring an added layer of protection crucial for retirees lacking expertise in crypto security.

Furthermore, bitcoin IRAs offer a legal framework for individual investors, safeguarding them against tax issues, legal uncertainties, and non-compliance risks. Investors can rest assured knowing that their investments adhere to existing financial regulations.

Despite its novelty, bitcoin IRAs can potentially facilitate continued wealth-building during retirement. They offer growth opportunities, diversification, and tax advantages within a familiar and regulated environment. bitcoin IRAs provide a way to benefit from bitcoin‘s uncorrelated nature and its potential for the future.

As with any investment, retirees should consult with a financial advisor to ensure that a bitcoin IRA aligns with their resources, risk tolerance, time horizon, and financial goals. In the realm of retirement planning, bitcoin IRAs present an innovative and compelling proposition, offering an alternative path to reap the rewards of bitcoin investments, even for those not well-versed in the technological complexities of cryptocurrency.

This is a guest post by Ivan Serrano. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or bitcoin Magazine.



### News source: bitcoinmagazine.com

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