https://bitcoinmagazine.com/markets/from-gold-to-bitcoin-the-evolution-of-retirement-assets-and-the-rise-of-bitcoin-ira

Gold has played a vital role in economics and politics, influencing much of human financial activity through shifts in economic systems. It has proven versatile and stable across upheavals and social changes. It even became a vital tool in global trade and currency exchange as we know it today.

In the 19th century, gold was the backbone of the global monetary system. Nations relied on the gold standard until the Great Depression and World War I. These events were significant inflationary catalysts, and economies, in a decades-long transition, abandoned the gold standard.

This process culminated in 1971 when the Federal Exchange could no longer exchange US dollars for gold. In 1976, the gold standard was abandoned entirely, and gold became a free asset.

Today, it is still considered a reliable store of value with a well-established market. After all, it has had the luxury of centuries—through various cycles of prosperity and economic upheavals—to prove its reputation. Gold boasts high liquidity and can be easily traded or sold in multiple forms: bars, coins, jewelry, or other representative instruments.

Gold vs Bitcoin: The Battle of Uncorrelated Assets

In retirement investments, gold is an uncorrelated asset, showing an average annual return that has reliably kept pace with inflation. In times of economic uncertainty, investors move to gold because of its reputation as a store of value and its non-correlation with stocks, which makes it ideal during market downturns.

However, today’s evolving monetary technology has provided investors with a new option: Bitcoin. Although it is a relatively new asset whose economic impact is still unfolding, Bitcoin has already been called “digital gold.” It shares many characteristics with gold, including its capped supply and its potential as a store of value.

In addition, Bitcoin offers a new type of value in the age of connectivity. It can be transferred digitally, something that physical gold cannot do. It is the world’s first digital bearer asset, a remarkable feat achieved through the convergence of economic design, cryptography, and decentralized networks.

For investors, the perfect portfolio—a balance of assets that echoes an individual’s risk preference and fits the economic climate of the times—is an ever-evolving target. All investors and professional fund managers seek new ways to add growth and diversification.

Retirees seek investments that provide diversification, preservation of wealth, and stability. On top of these, many retirees seek continued income that can only arise from growth—investments that capitalize on the opportunities of the times.

Finding the right mix of less risky, stable, and higher-risk growth assets has always been challenging for even the most experienced financial planners. Some believe Bitcoin fits into the new retirement portfolio as an added diversifier. Like gold, it can work as an uncorrelated asset and hedge against systemic risks.

Bitcoin IRAs: Exposure to the Best Performing Asset of 2023

Another way to replicate current investment products is the creation of Bitcoin IRAs. The IRS considers Bitcoin and other crypto investments in retirement accounts as property. Government rules prevent Roth IRAs from holding “coins” and “collectibles,” but these do not appear to cover Bitcoin.

According to NYDIG’s most recent reports, Bitcoin tops its 2023 returns list based on asset class. As of October 6, 2023, it boasts a 63.3% increase YTD, besting US large caps (28.2%), commodities (6%), cash (3.8%), and gold (1.1%). On a countdown to its next halving—around April 2024—many investors are eyeing Bitcoin as a possible addition to their retirement accounts.

Some IRA providers are already offering crypto investments in the form of cryptocurrency IRAs—specifically Bitcoin IRAs. A Bitcoin IRA works like any traditional self-directed IRA (SDIRA) and carries the same benefits. Instead of investing in Bitcoin directly and taking charge of one’s custody, Bitcoin IRAs provide the investor convenience, security, and ease.

A Bitcoin IRA lets you buy and sell Bitcoin in a tax-advantaged retirement account. A Bitcoin IRA allows retirees to maintain traditional retirement accounts while having a separate account that invests in novel currencies like Bitcoin.

Why add it to your portfolio?

Many Bitcoin advocates promote Bitcoin as “digital gold.” This simplified view has been held and promoted by those who believe Bitcoin can serve as a reliable store of value in digital form.

Based on this view, Bitcoin investments analogous to gold products are already being created. Just as gold ETFs hold physical gold as their underlying asset, Bitcoin products are structured similarly to these ETFs and provide exposure through funds traded on stock exchanges.

The first applications of Bitcoin ETFs have been lodged in recent years, with multi-trillion asset managers like BlackRock and Fidelity providing optimism about their future. The recent verdict of a DC court on Grayscale’s bitcoin ETF application invalidating the SEC’s argument for denying its Bitcoin investment product has been interpreted as a turning point for the industry.

Proponents of Bitcoin ETFs remain vigilant as efforts to gain approval for a spot Bitcoin ETF persist from prominent asset managers. Depending on how the SEC reacts, Bitcoin ETF approvals may follow, opening the floodgates for increased demand.

Make Retirement Planning Less Complex With a Bitcoin IRA

Despite its status as a new asset, Bitcoin’s performance in 2023 stood out for its ability to keep a narrow trading range despite intense external pressures. It’s been trading sideways around the $25,000 to $31,000 range, resisting volatility and breakouts in either direction.

Retirees or those planning for retirement interested in adding riskier assets to their portfolios, moving with the times, and seeking avenues for future growth can add Bitcoin to their retirement investments without learning the technical nuances of keeping their Bitcoin safe.

They can set up Bitcoin IRAs either as traditional or Roth accounts. A Roth Bitcoin IRA permits tax-free withdrawals in retirement. A traditional Bitcoin IRA offers tax-deferred growth. Retirees in higher tax brackets can take advantage of this feature.

Why consider Bitcoin IRAs over purchasing and storing Bitcoin directly? Bitcoin IRAs extend to estate planning easily, providing a new advantage compared to traditional retirement accounts. Swan Bitcoin IRA, for example, offers enterprise-grade custody with insurance coverage. It provides a layer of protection essential for retirees who may not be well-versed in crypto security.

Moreover, Bitcoin IRAs provide a legal framework for individual investors, protecting them from tax issues, legal uncertainties, and non-compliance risks. Investors are assured that their investments are fully compliant with existing financial regulations.

Despite being a novel instrument, Bitcoin IRAs may provide a path for continued wealth-building during retirement. They offer the potential for growth, diversification, and tax advantages in one package within the framework of a familiar and regulated environment. They are one way to benefit from Bitcoin’s uncorrelated nature and future potential.

As with any investment, retirees should consult a financial advisor to confirm whether a Bitcoin IRA investment conforms with their resources, risk tolerance, time horizon, and financial goals. In a brave new world of retirement planning, Bitcoin IRAs offer an alternative, innovative, and compelling proposition to explore the rewards of Bitcoin investments, even for those not delving into the technological complexities of crypto.

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.

https://bitcoinmagazine.com/markets/grayscale-wins-court-case-vs-sec-bitcoin-etf-on-the-horizon

Grayscale Investments LLC, one of the world’s largest crypto asset managers, has secured an unexpected court win against the US Securities and Exchange Commission (SEC). A three-judge panel in DC’s Court of Appeals in Washington ruled that the SEC’s denial of Grayscale’s proposal was “arbitrary and capricious” in that the SEC failed to explain the difference in treatment between spot bitcoin ETFs and futures bitcoin ETFs.

The landmark ruling is believed to be a boon to an industry fraught with regulatory uncertainty. Grayscale—said to be the equivalent of a crypto Goldman Sachs for large OTC trades—could pave the way for future decisions that favor the first Bitcoin ETF or any product of its kind. Moreover, the court ruling may have set a new trajectory for bitcoin, creating the foundation for the next wave of financial products built on the original crypto asset.

But what does Grayscale’s legal victory mean for retail investors, institutions, bitcoin price, the broader crypto sphere, and the markets? Is it genuine cause for optimism, considering the crypto industry has faced significant blows to its image since 2022, which included scandals among well-known projects and exchanges, resulting in severe government pushback? Could it be something to look forward to after Bitcoin has been trading sideways for quite a while now?

Is A Spot Bitcoin ETF On The Way? The Probabilities

The court victory is the second legal triumph for the crypto industry in recent months. In July 2023, A judge ruled in favor of Ripple Labs, stating that the company did not violate federal laws by selling its XRP token on public exchanges.

Bitcoin, however, sets itself apart as an asset as it is not considered a security by most government laws, unlike other crypto tokens with more centralized issuance and governance. Given the proper framework, it can also become an important reserve currency. Some analysts believe the recent developments concerning Grayscale have increased the probability of a spot bitcoin ETF approval.

What’s next for bitcoin ETFs? The future depends on how SEC Chair Gary Gensler decides to play it. Does he capitulate or fight till the end? Gensler and the SEC have several options.

First, the US SEC can choose to appeal the case. If it does, the order will be stayed until a decision is made on the appeal. Afterwards, the regulator is given 45 days to decide. The SEC can take this route. However, the stern ruling will appeal to a more challenging option.

The SEC’s succeeding options hinge upon their decision to appeal. As their next move, they could approve all or some of the spot Bitcoin ETF applications already lined up. Besides Grayscale, financial behemoths like BlackRock, VanEch, WisdomTree, Valkyrie, Fidelity, Invesco, and Ark/21 Shares have lined up their Bitcoin ETF applications. Approving one or all of these applications could be a watershed moment for Bitcoin and crypto.

If the SEC decides to continue its hostile stance, it can choose to delay as long as possible or as permitted by law. The SEC has a window of 240 days to approve or deny ETF applications. Ark’s is the earliest application among the institutions this year, published in the Federal Register on May 15. This date means the SEC must decide on the first application by January 10, 2024.

The third option for Gensler and the SEC would be to spin a new rationale for denying the application. This new approach will push Grayscale to sue again. The previous argument—that the market size for a spot Bitcoin ETF was insufficient to prevent manipulation—can no longer be used.

The last option for the US SEC is to kill the bitcoin futures ETF. In theory, this scenario is possible but unlikely because the SEC recently approved leveraged bitcoin futures and thus would find it inconvenient to backtrack on its decision.

Impact Of A Spot Bitcoin ETF Approval

Should a spot Bitcoin ETF be approved, the decision would impact crypto and finance unprecedentedly. The following are likely scenarios:

Market Dynamics Unleashed

More than a regulatory development, a spot Bitcoin ETF approval could open a floodgate of opportunities and revitalize the markets. ETFs make investing more accessible. They make trading easier on traditional stock markets.

A spot Bitcoin ETF would simplify access to Bitcoin without the technological complexities such as managing digital wallets and trading bitcoin on retail exchanges. Those not interested in learning the technical side or keeping their Bitcoin in self-custody will benefit from this new financial product. Moreover, the added protections of an ETF wrapper could appeal to more conservative participants. This development could introduce a wave of new investors into the crypto markets.

A Transformational Gateway For Retail Investors

Retail investors are often limited because they can be excluded from significant opportunities in markets due to minimum required investment, the need for specialized knowledge, and technical barriers.

Bitcoin ETFs can transform retail access to Bitcoin by simplifying it. A retail investor can purchase an ETF share through a traditional brokerage account. With this simple purchase, one can gain exposure to bitcoin price movement, thus becoming the gateway to new investment opportunities. Regardless of the brokerage account size or geographic location, individuals can access the world’s best-performing asset over the last decade without learning new skills.

Bitcoin Price Responds To New Regulatory Status

The markets could respond favorably to the news of a bitcoin ETF approval. Bitcoin immediately responded to the report of Grayscale’s court victory by registering a 6 percent jump. However, that was more of a knee-jerk reaction, which could not be sustained without solid footing.

A proper ETF approval could send the price upwards by communicating a message of institutional acceptance, regulatory clarity, and legitimacy. The new regulatory status of spot bitcoin ETFs could shift the sentiment among retail investors to a bullish one. The speculation around the influx of new retail investors and the possible entry of more institutional capital could influence the price.

Opening The Floodgates Of Institutional Capital

Institutional investors are hesitant over new asset classes, and Bitcoin is no different. ETFs provide the regulatory oversight, custodial services, and liquidity necessary for institutions to invest entirely in crypto. With these new protections underway, the institutional interest could skyrocket, thus unlocking billions of dollars of institutional capital. ETFs represent a crucial regulatory on-ramp to crypto markets.

Grayscale’s Court Win: Prelude To A Paradigm Shift?

While Grayscale’s unexpected court victory against the US SEC is a positive signal on the way to a spot Bitcoin ETF approval, it is not a guarantee that a spot ETF will happen. However, it does narrow the legal obstacles towards a Bitcoin ETF in the foreseeable future. In the speculative journey that is the crypto markets, the victory is cause for cautious optimism and encourages financial institutions to pile on their applications.

Currently, the crypto markets are in a slump. Trading volumes are low. On centralized exchanges, the cumulated volume for August 2023 was $400 billion, the lowest since December 2020. News like Grayscale’s win over the SEC argument signals a shift in regulatory adoption in the US and is highly welcome in the languishing cryptosphere.

Several of the world’s largest asset managers already want in on the action. Multi-trillion-dollar BlackRock sent shockwaves through the industry by filing its Bitcoin ETF application, causing other prominent asset managers to follow suit.

Should one or all of these bitcoin ETF applications be accepted by regulators, it will signal a transformative event in bitcoin and crypto history—one that could mirror the impact of the first gold ETF. For now, however, it indicates an escalation of the battle between crypto giants or financial innovators and regulators, wherein the best arguments and the most determined proponents prevail.

With this new development, we could stand on the cusp of a new era of Bitcoin and crypto investments. Keeping track of the moving landscape and adapting investment strategies is essential.

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.

https://bitcoinmagazine.com/culture/why-did-balaji-srinivasan-bet-1-million-on-bitcoin

This is an opinion editorial by Ivan Serrano, a growth marketer and business consultant.

In the cryptocurrency world, bold bets and outrageous predictions are not uncommon. And yet, Balaji Srinivasan, a prominent and occasionally-controversial figure in crypto and tech, made major finance headlines when he announced a daring wager that bitcoin would reach a staggering $1 million per coin within 90 days.

The Bitcoin and larger crypto community immediately began analyzing what drove him to make such a daring statement. Srinivasan predicted this on March 17, 2023 — when bitcoin was trading at $26,000 in the middle of a bearish market. The terms of the bet stated that if the bitcoin price did not reach $1 million by June 17, 2023, he would pay out $1 million to the other party, Twitter pundit James Medlock. The bet would settle in USDC stablecoin. Srinivasan estimated the odds at forty to one.

Many were skeptical about the pronouncement, calling it clout chasing, a marketing ploy and even a pump-and-dump scheme. Swan Bitcoin co-founder Cory Klippsten brought up Srinivasan’s history of promoting altcoins, which earned him the ire of Bitcoin Maximalists. Many in the crypto world were dumbfounded yet intrigued enough to investigate what made him take the bet and whether he would be good for the money if he were to lose.

Along with his audacious prediction, Srinivasan talked about the Federal Reserve’s money printing and dollar devaluation. He warned against the Fed’s rate hikes, saying they weren’t anti-inflation but a smokescreen aimed at propping up a banking system on the brink of collapse.

Fast forward to May 2, 2023, when Srinivasan conceded his bet early and said it had been closed out “by mutual agreement.” Medlock acknowledged the payment on his Twitter account.

In a video posted and pinned on his Twitter profile, Srinivasan explained the previously-veiled reasoning behind his public relations stunt. Outside of his explanation, this article delves into the possible motivations behind Srinivasan’s audacious bet, explores his background and involvement in the crypto industry and reviews the impact of such announcements on the global Bitcoin community.

Furthermore, I will discuss why, despite the short-term failure, Srinivasan’s stunt may hold some validity for the future, exploring the financial and economic conditions in which bitcoin could potentially be an ideal long-term investment, and could eventually reach a value of $1 million.

Understanding Srinivasan’s Background

To properly dissect the controversial bet, it’s essential to understand its maker’s significance within the crypto industry and beyond. Srinivasan is a well-known entrepreneur, technologist and investor who has significantly contributed to the cryptocurrency industry.

He co-founded 21 Inc., a Bitcoin mining startup that later became Earn.com, a model allowing senders to pay users in crypto to reply to emails. Earn.com was subsequently acquired by Coinbase in April 2018 and launched as Coinbase Earn. Balaji then became the first CTO of Coinbase. Coinbase Earn shut down in 2019.

Srinivasan is renowned for his deep understanding of technology and ability to identify emerging trends in the industry. He joined venture capital firm Andreessen Horowitz as a general partner in 2013. He holds a master’s degree in chemical engineering and in electrical engineering. He has previously taught at Stanford University. He has sometimes been hailed as a polymath because of his multiple involvements in various tech spaces.

Possible Motivations Behind The Bitcoin Bet

Attention And Publicity

By making such an extravagant bet, Srinivasan courted substantial attention and media coverage. As such, Srinivasan’s bet may have been a strategic move to gain visibility for himself and his viewpoints within the crypto community.

Challenging Conventional Thinking

Through a publicity stunt, Srinivasan may have sought to challenge skeptics and provoke discussions on the transformative power of Bitcoin. Such bold statements can spark debate and encourage critical analysis of cryptocurrencies’ underlying technologies and economic principles.

Advocacy For Bitcoin

While he has been criticized for promoting altcoins and pump-and-dump schemes, Srinivasan remains an ardent supporter of Bitcoin and its potential to disrupt traditional financial systems. The $1 million bet could have been an attempt to showcase his unwavering belief in Bitcoin’s future success and encourage others to consider its potential.

Some critics, however, saw it as an attempt at price manipulation. It could also have been an attempt on his part to regain credibility and position himself as a “mostly Bitcoin” advocate after his previous, alleged attempts at alt-crypto promotion.

A Means Of Raising Public Alarm

It also may be that he genuinely feels strongly for a cause and saw the bet as a means of starting a robust discussion around a pressing economic issue involving inflation and the benefits of bitcoin as a safe haven asset.

The Effects Of Exaggerated Bets On Bitcoin Culture

Exaggerated bets and pronouncements have become a part of the Bitcoin culture, with enthusiasts and experts constantly making predictions about future prices and market movements. While these bold claims generate excitement and media attention, they can contribute to unrealistic expectations, market manipulation and excessive speculation.

Influencers need to exercise restraint because the Bitcoin and larger cryptocurrency communities are highly reactive and trade the news. Moreover, investors and participants in the space need to exercise caution, conduct thorough research and base their decisions on sound analysis rather than relying solely on sensational predictions.

Burning $1 Million To Prove A Point

As noted above, on May 3, 2023, Srinivasan posted a video on his official Twitter account with the stark caption, “I burned a million to tell you they’re printing trillions.”

Whether this is a genuine and sincere effort to sound the alarm on the U.S. government and the Fed’s harmful policies or a mere save for a failure at price prediction is best left to the reader to judge. However, Srinivasan made several valid points that push his argument about hyperinflation and its dangers.

“I wanted to tell you in a provable way — to send a provable signal — that the economy was wrong. I’m not in the habit of burning a million bucks for the sake of it,” he said in the video. “There’s something wrong with the economy, and the state is not telling you about it. And things could unwind very fast.”

He then pointed to the speed of the collapse of Silicon Valley Bank (SVB) to the government’s subsequent printing of $300 billion. He also mentioned that after SVB, there have been $500 billion in outflows from small lenders to money market funds and big banks.

He compared the speed of these phenomena to the span from concrete COVID-19 announcements to the sudden implementation of lockdowns — from Ben Bernanke’s announcement of a “mild recession” in 2008 to a full-fledged global financial crisis, which took just two quarters to unravel.

“In each of these cases,” Srinivasan added, “too slow was being too late.”

Srinivasan argued that in today’s U.S. economy, “many things are breaking at once.” The most glaring issue, in his opinion, is the U.S. debt ceiling, wherein markets were predicting a high probability of sovereign default. He quoted “Dr. Doom” economist Nouriel Roubini, saying that most U.S. banks are near insolvency. Roubini has confirmed this sentiment, saying that U.S. regional banks face a credit crunch.

Furthermore, he drew parallels to 2008, including successive bank failures within a short period and commercial real estate prices crashing by double digits. Traditional safe havens like bonds, he contended, aren’t safe. Insurance is under pressure as well.

He also mentioned the phenomena of de-dollarization, decreasing U.S. dominance on the global stage, as manifested by the movement of other countries away from the USD as their medium of exchange or store of value. He also pointed out the reallocation movements of smart money and central banks toward gold.

Afterward, he asked whether anyone sees infinite dollar printing continuing for centuries or whether other — shorter — timelines are more probable. Could the system collapse happen within months, years or decades? He made a probability estimate for each. He proceeded to recommend that if you believe the system collapse may happen sooner than the highly-optimistic span of centuries, you must take appropriate action.

He then confirmed his reason for the bet: to raise public alarm at his own expense. While this is a radical way to draw attention to a thesis, it does put the spotlight on brewing economic problems and on Bitcoin. 

Will Bitcoin Reach $1 Million Anyway?

While Srinivasan’s bet did not materialize as expected, it does not necessarily discredit the possibility of bitcoin reaching a value of $1 million per coin in the future. Several economic and financial conditions could contribute to such a scenario:

Widespread Institutional Adoption

Increased acceptance and adoption of bitcoin by institutional investors, banks and governments could drive significant demand and price appreciation. Institutional involvement would provide legitimacy and stability to the market, attracting more capital and increasing the price.

Limited Supply And Halving Events

Bitcoin’s scarcity is a crucial factor in its value proposition. As the supply of new coins decreases due to the halving events that occur roughly every four years, the reduction in the inflation rate could exert upward pressure on the price, potentially leading to substantial appreciation.

Global Economic Instability

Economic crises, hyperinflation or a loss of faith in traditional financial systems could prompt individuals and institutions to seek alternative stores of value, such as bitcoin. In such circumstances, the demand for bitcoin as a hedge against inflation or economic uncertainty could skyrocket, potentially driving the price to extraordinary levels.

Future Potential

Balaji Srinivasan’s bold bet on Bitcoin reaching $1 million per coin within 90 days was a daring move that captured the attention of the crypto community and the media. Despite the short-term and possibly intentional failure of the bet, Srinivasan’s bet raised essential questions about the future potential of Bitcoin.

Given the right economic and financial conditions, including widespread institutional adoption, limited supply and global economic instability, bitcoin could very well reach $1 million per coin. But, as with any investment, caution, thorough research, and a long-term perspective are essential when considering the possibilities and risks associated with bitcoin.

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.