When looking to fill out your self-directed IRA, there are many alternative assets to consider. One of the newest investment options has been called the “future of currency.”

Cryptocurrency is becoming one of the most exciting investment options for retirement savings, but is this asset right for you? As you perform your due diligence, there is a lot to discover with this new wave of digital currency. If you are considering adding cryptocurrency to your SDIRA portfolio, here’s what you need to know.

What are Cryptocurrencies?

Cryptocurrency is considered the future of money. It is a virtual currency, like Bitcoin or Ethereum, and it is a part of a world-wide monetary exchange. These “blockchain” exchanges are tracked publicly with verified transactions. This relatively new investment, while risky and unpredictable, can be an exciting asset choice.

If you are interested in budding technology or investing in the “next big thing,” cryptocurrency could be the right choice for you. Keep in mind that many others are jumping into the market due to recent popularity. Such sudden activity could cause digital currencies to bubble and eventually pop. If cryptocurrency is the right investment choice for you, here are three steps to get you started.

1. Research your Cryptocurrency

So, you’ve decided to dive into the digital currency market! The first step toward investing involves exploring the different types of cryptocurrencies available. While the most popular are Bitcoin and Ethereum, there are other new digital currencies entering the market every day. Some of the recent additions include Ripple, Litecoin, Dash, Monero, and many others. Bitcoin is still considered the front-runner.

Before the surge of new currency, altcoins were also an option; however, they weren’t considered secure or legitimate. Currently, alternate digital currency has gained traction, making it easier to fill out a portfolio.

As you select your cryptocurrency, check the market cap for all available tokens. Coins can actively rise and fall in and out of the market; it’s a good idea to have back-ups bearing in mind how unpredictable new currency could be.

Where are the Market Value and Risks?

When exploring the cryptocurrency markets, be aware of the difference between ‘good and bad’ coins. While buying Bitcoins may seem like an easy task, it’s not so simple to distinguish between the newer currency options.

Keep in mind; good coins normally have an enthusiastic development team, community, and a transparent vision. Disreputable coins are more focused on the quick cash grab and don’t have a well-formulated plan. Without proper research, it’s possible to lose your investment to a faulty coin.

In addition to bad coin companies, coin stocks tend to rise and fall as easily as the stock market. A new coin could rise up only to die days later. The high-risk approach can often lead to a decent payout if you stay on top of your investment and spread your funds wisely.

2. Choose Wisely

One of the difficulties with investing in something so new is the lack of knowledge surrounding it. To invest SDIRA money, the IRS requires that you have an IRA custodian. Finding a custodian well-versed in cryptocurrency exchanges could prove to be difficult. Perform your due diligence and select the best fit for you. After you pick a custodian, it’s time to decide on a wallet.

In order to hold any cryptocurrency, you must have a digital wallet. These track any exchanges, hold your public and private keys, and keep a record of all of your transactions.

There are many wallets to choose from based on the level of security and ease you wish to access your digital cash. All of these platforms are public and can vary by skill level. You can choose from a variety of wallets: software, hardware, or paper. Each of these wallets has a different level of security.

One of the biggest issues with digital currency is the fact that it is “digital.” Cryptocurrency is not immune to any cyber-attacks, nor is it possible to recover funds after a faulty exchange or a file hack. It’s crucial to select the wallet that can protect your assets, especially if you want to let it grow over time.

As you make your final selections, keep in mind that the wallet and digital currency you choose can be based on your location, skill level, and how varied you want your portfolio. Your wallet and custodian should match these needs.

3. Stay Updated and Informed

As an investor and an SDIRA account holder, you are responsible for reporting all market value changes to your IRA custodian. It’s crucial to monitor your coins and the value in such a high-risk market. Watch the balance between your investments and know when to buy and sell your digital currency. As you invest, keep an eye on purchase bubbles and invest in a steady currency, like Bitcoin.

Staying on top of your investments means reporting any changes to your custodian. In addition, be sure to keep security measures high. The cyber-world is uncertain, and there is no way to return your private keys if they are stolen. To stay on top of this risky venture, be aware of the pitfalls and perform your due diligence. With the right investments, cryptocurrency could be the best asset in planning for your future.