Making Your Bitcoin Work for You

Don’t just leave your Bitcoin in your crypto wallet. Whether it’s saving on taxes, planning for the future, or just making everyday spending easier, there’s plenty you can do with your Bitcoin.

 

 

Crypto enthusiasts have championed the benefits of Bitcoin investment for years. But if you’re new to Bitcoin (and maybe even if you aren’t), you may not realize that you can do much more with your Bitcoin than just keep it in a wallet and wait for it to appreciate. Let’s take a look at a few of the ways you can get more out of your existing Bitcoin holdings

Invest in a Bitcoin IRA

You might already have some Bitcoin holdings. You also might have an IRA. But did you know that you can bring these two things together? Bitcoin IRAs are a relatively new invention (the first one was created in 2016), but they’ve rapidly grown in popularity among tech-savvy investors.

These investment vehicles are an exciting way to diversify your portfolio, and they offer you the same tax advantages that IRAs funded with fiat currency do. There’s an additional tax advantage as well—if you turn a profit trading Bitcoin from within the account, you don’t pay capital gains tax unless you withdraw the funds.

That said, Bitcoin IRAs aren’t without downsides. Many come with high fees for account setup, maintenance, and more. Bitcoin’s value can also change dramatically, so there’s a potential for significant gains—but also for significant losses.

Borrow against your current holdings

You’ve heard of secured loans before. But have you heard of a Bitcoin loan? The name might make you think of an institution lending you Bitcoin, but it actually refers to a loan you receive by putting up your Bitcoin as collateral.

Bitcoin loans give you the unique opportunity to effectively cash out your crypto holdings without actually having to sell. After all, Bitcoin fluctuates frequently and dramatically in value. If you find yourself in need of quick cash but still want to wait for Bitcoin values to rise before liquidating, try a Bitcoin loan. You get cash upfront, and once you’ve paid the loan back, your cryptocurrency is returned to you.

The process of actually obtaining a Bitcoin loan is simple. You apply with the lender, the lender verifies your Bitcoin holdings, and you receive the funds. But before you send in an application, it’s critically important to do your research.

Crypto lenders don’t have nearly the same regulatory oversight as traditional banks and other financial institutions do. You want to make sure you choose an established and reputable lender—if the lender goes under or hackers target your Bitcoin holdings, you may not be able to recover your crypto.

As a side note, don’t take the lender’s word for it if they claim they’re secure. Some crypto companies have swindled customers by falsely claiming to be FDIC-insured.

Set up an inheritance plan

If you have considerable assets, you may need to plan for more than just your own retirement. Having a detailed, actionable inheritance plan can give you the peace of knowing your loved ones will be financially supported in the event of your death.

You can, of course, create an inheritance plan with a traditional wealth management firm. But did you know that you can also set up an inheritance protocol to ensure your Bitcoin is passed down correctly? 

Some providers of Bitcoin IRAs and/or Bitcoin loans also offer inheritance planning services. Making a small investment of time and money now ensures that your Bitcoin makes its way to the right person. Best of all, most inheritance protocols don’t require your recipient to have any technical skills.

Save money on online shopping

Not every retailer is eager to embrace cryptocurrency. While Bitcoin and other currencies are certainly more mainstream than they were even a few years ago, they’re still seen as “fringe” by many.

That said, some companies (and even some major retailers) accept payment in cryptocurrency. Here are a few especially notable ones:

• Overstock
• Microsoft
• Shopify
• Ralph Lauren
• Rakuten
• Etsy
• Home Depot
• NewEgg

Some of these companies even offer discounts if you pay using Bitcoin or other forms of cryptocurrency. Discounts are usually small, but they can add up over time.

Don’t be discouraged if your preferred online retailers don’t accept Bitcoin or other forms of cryptocurrency just yet. The list of retailers and other companies accepting crypto is growing every day.

Get a Crypto Debit Card

You might be able to use your Bitcoin holdings when you shop online (at least in some places). But what about shopping in brick-and-mortar stores? After all, there are no physical Bitcoins you can keep in your (actual, non-crypto) wallet.

That’s where a crypto debit card can come in handy. These debit cards work a lot like the prepaid debit cards you see in stores. You load a certain amount of Bitcoin onto your card, and you can then use the card to make purchases just about everywhere—including places that don’t accept Bitcoin or other forms of cryptocurrency as payment. At the time of purchase, the card converts the pre-loaded Bitcoin into your local currency.

You aren’t limited to just making purchases with a crypto debit card, either. You can use a crypto debit card to withdraw cash from an ATM just like you would an ordinary debit card.

Of course, many card issuers charge fees. These may come in the form of currency conversion fees, annual fees, transaction fees, etc. However, most crypto debit cards offer rewards that make up for the fees. The most common reward is cash back—some of the best debit cards offer cashback of up to 8%, but many offer 4% to 5%.

Are you getting the most out of your Bitcoin?

As Bitcoin and other forms of cryptocurrency have become more normalized, potential uses for Bitcoin holdings have only grown. You don’t have to include Bitcoin in your retirement savings or use it to get a loan, of course. But if you stay tuned to developments in the cryptocurrency world, you’ll almost certainly find new ways to make your Bitcoin work for you.