Should You Own Bitcoin In Your Roth IRA?

If you have read recent headlines you see stories about the extreme price action on Bitcoin.

As I write this, Bitcoin is hovering around $91,200. It was around $68,000 just a couple of weeks ago.

Should you care? Should you own Bitcoin? Is it too late?

Here are several reasons the price is ballooning:

Donald Trump won the 2024 Presidential election.

President Trump is on record of being pro-crypto while the Biden administration has been either agnostic or outright threatening of it depending on how you look at it. The current administration's SEC chairman, Gary Gensler has been critical of crypto and has brought on many lawsuits on the industry.

President Trump has stated his favor for having a U.S. strategic Bitcoin reserve.

This means the U.S. would hold Bitcoin as a reserve asset like they do with gold. This would give credence to the argument that Bitcoin is already "digital gold" and something that countries will hold in the future. 

There is already a bill drafted this past summer by Senator Lummis that would call for the U.S. Government to buy 1 million Bitcoin over 5 years. To put that in perspective there will only be 21 million Bitcoins ever created. (19.8 million have already been mined.)

Since Republicans will have control over both houses of Congress this bill looks likely to pass. If the U.S. took this step most people believe other countries would have no choice but to buy Bitcoin for their own reserves. Many believe countries will and currently are front-running this likelihood and that is why the price is going up so fast right after the election.

Even if President Trump lost the election there are many in the Bitcoin community that think the election didn't matter and Bitcoin's price would rise quickly anyway. 

History shows there have been 4-year cycles with Bitcoin that start with the halving. 

Those who believe this cycle will continue, think that the price will go up extremely, just like it has every other cycle before it, no matter who our leaders are. Some predict a Bitcoin price of over $100,000 by mid to late 2025, others say over $200,000, and still others say more than that!

If you believe in the 4-year cycle, you should also realize that history would show it reasonable for Bitcoin’s price to skyrocket to $250,000 in 2025 but also drop 75% to around $60,000 in 2026-27. That would continue the historical trend.

There are now Bitcoin ETFs that you can buy in the traditional finance space.

You used to have to open up a digital wallet, purchase your Bitcoin that way, and make sure you didn't lose the password so that your Bitcoin wouldn't be lost forever. (This has unfortunately happened to many early Bitcoiners.) It did get easier because crypto exchanges (like Coinbase) popped up but even here, there have been cases of exchanges going bankrupt or being hacked and people losing their investment.

With the Bitcoin ETF, you can now purchase this in your regular investment accounts. Even in your Roth IRA!

Plus, it is now the responsibility of the largest and most trusted financial institutions (like Fidelity or Blackrock) to custody your Bitcoin and decrease the risk of losing it because of bad maintenance or forgotten passwords, etc.

This has allowed institutions and regular people to feel comfortable buying it for the first time. This has increased demand significantly. The ETF launch is by far the most successful of all time.

Companies are buying Bitcoin and placing it on their balance sheets.

Tesla, MicroStrategy, Space X, and Block are just a few companies that have purchased Bitcoin. Many believe this trend will increase over the next couple of years. As soon as next month, Microsoft is holding a vote at their shareholders meeting on whether to have a Bitcoin buying strategy.

Digital assets (Which include all crypto. Bitcoin being the largest and most established.) have been making a strong case for being a legit asset class in traditional finance.

Portfolio managers are beginning to see the benefit of adding a percentage of Bitcoin or digital assets into their asset allocation strategy. Not just because the price has been going up. But also because the allocation helps the entire portfolio on a risk-adjusted basis.

All of the above things put together have created FOMO with not just young 20 somethings, but also with the most conservative suit-and-tie traditional finance people.

Should I own Bitcoin in my portfolio?

Good question. It all depends on your personal goals, comfort with investment risk, etc.

Everyone's situation is different.

People doing so will likely be much more common than it currently is.

Investment managers will be more comfortable with a 1-2% allocation of Bitcoin or other crypto in retirement portfolios.

It probably makes sense to at least consider it.

A few good tried and true investment concepts to consider:

Bitcoin is a very volatile asset. It is still only 15 years old. Even though the likelihood has decreased considerably, it could conceivably still go to zero.

Only invest in Bitcoin what you can afford to lose.

Bitcoin or any single asset (or single stock) should not be a large percentage of your portfolio. A popular rule of thumb is that no single stock should be more than 5% of your entire portfolio. It may be wise to apply that rule of thumb to Bitcoin as well.

Dollar-cost averaging can be a good strategy.

If you are having FOMO. Be careful! Make sure you take a measured approach if you are going to put Bitcoin in your portfolio.