Fidelity Now Allowing Bitcoins In IRAs

[FandangledGizmo]

http://www.zerohedge.com/news/2013-12-11/fidelity-now-allowing-bitcoins-iras

We are sure this will all end well... but as Marketwatch reports, Fidelity has partnered with SecondMarket’s Bitcoin Investment Trust to allow its clients to save for their retirement by putting the virtual currency in self-directed IRAs.

 

Via Marketwatch,

“If you are a Fidelity client, you can now invest in the Bitcoin Investment Trust through an IRA,” said Barry Silbert, chief executive of SecondMarket, in an interview.
 
...
 
MarketWatch previously reported that SecondMarket had teamed up with self-directed IRA providers PENSCO, Entrust and Equity Institutional  to allow investors to save for retirement with bitcoin.
 
Fidelity is the largest and most well-known company that SecondMarket has teamed up with for this, Silbert said, adding that he hopes to add a few more providers soon.

Edit: In case you didn't know

FMR LLC (Fidelity Management and Research) or Fidelity Investments is an American multinational financial services corporation. It is one of the largest mutual fund and financial services groups in the world.

http://en.wikipedia.org/wiki/Fidelity_Investments

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[A L I E N]

Interesting development!

[TheJacob]

They charge 2% annually and 1.5% on the backend. Up to you to determine whether that is a fair price to store your bitcoins. From what I can tell they aren't trading bitcoins. They are literally buying and storing bitcoins on the investors behalf and charging them a fee.

I suppose those percentages could be worth it if they have ways of obtaining bitcoins at lower prices than the average person.

[Melbustus]

They charge 2% annually and 1.5% on the backend. Up to you to determine whether that is a fair price to store your bitcoins. From what I can tell they aren't trading bitcoins. They are literally buying and storing bitcoins on the investors behalf and charging them a fee.

I suppose those percentages could be worth it if they have ways of obtaining bitcoins at lower prices than the average person.

They're probably buying in large blocks from large holders, negotiated either at or slightly below weighted-avg exchange rates, and obviously with no slippage. That'll be possible for a while longer; there are probably a bunch of early adopters who are looking to diversify.

But in any event, while you or I would rather just store our own bitcoins and avoid the fees, it's reasonable for the less technically-savvy. Additionally, this allows investors to gain exposure to bitcoin through an already-understood vehicle (ie, your CPA will be able to figure out the tax consequences easily). And the fees will likely remain pretty negligible compared to the overall gain or loss, for quite some time, due to the fact that bitcoin will remain volatile for a while; we're still obviously in wild price-discovery mode for a fascinating and far-reaching new technology, asset-class, and monetary system.

[DeathAndTaxes]

One important point to consider is that while Fidelity will allow investing in the Bitcoin Trust, the Bitcoin Trust is limited to accredited investors (>$1M in assets or >$200K annual income or a few other conditions).  So grandma (unless she is an accredited investor) won't be using this even if she has a Fidelity brokerage account.   Still it should help the Bitcoin ETF convince regulators of the need and merit for the ETF.

[FandangledGizmo]

Personally I think this is HUGE! The biggest thing since China IMO.
 
Right now Bitcoin investment has been driven predominantly by the male 24-38 demographic, and veering more towards those that are slightly tech savvy. So it has been very niche.

However, the vast majority of the wealth is held by a small % of the 40+ demographic. But thus far Bitcoin has lacked the legitimacy, exposure and ease of access this market requires.

But lately Bitcoin has got much more exposure, gained a certain degree of legitimacy in the US and China. However ease of access has been the problem, banks can be quite problematic especially for large sums, and the whole process of bitcoin clients, wallets & exchanges is still a significant barrier to entry for this market. This announcement changes that. Fidelity has over 4 trillion $ of assets under management and thousands of HNWI as clients.

ATM I think the BTC market is just waiting for some further clarification from China on whether it's OK for retailers to accept them as payment, once the price adjusts to that news then I think this pension/mutual funds moving in news will be the big 2014 BTC price driver.

[TheJacob]

But in any event, while you or I would rather just store our own bitcoins and avoid the fees, it's reasonable for the less technically-savvy. Additionally, this allows investors to gain exposure to bitcoin through an already-understood vehicle (ie, your CPA will be able to figure out the tax consequences easily). And the fees will likely remain pretty negligible compared to the overall gain or loss, for quite some time, due to the fact that bitcoin will remain volatile for a while; we're still obviously in wild price-discovery mode for a fascinating and far-reaching new technology, asset-class, and monetary system.

If you don't understand bitcoin enough to figure out how to properly store them safely then you probably shouldn't be pumping $25,000+ into them.

[kellrobinson]

Is this just another form of hoarding?  It might exacerbate volatility.

[FandangledGizmo]

But in any event, while you or I would rather just store our own bitcoins and avoid the fees, it's reasonable for the less technically-savvy. Additionally, this allows investors to gain exposure to bitcoin through an already-understood vehicle (ie, your CPA will be able to figure out the tax consequences easily). And the fees will likely remain pretty negligible compared to the overall gain or loss, for quite some time, due to the fact that bitcoin will remain volatile for a while; we're still obviously in wild price-discovery mode for a fascinating and far-reaching new technology, asset-class, and monetary system.

If you don't understand bitcoin enough to figure out how to properly store them safely then you probably shouldn't be pumping $25,000+ into them.

I think it's all relative. $25,000+ to a HNWI is the same as a median person 'pumping $25' into BTC.

Is this just another form of hoarding?  It might exacerbate volatility.

I agree, but in the short term, if you're in BTC, buy an umbrella, because it's going to be raining $,¥,€ & £  

[btc4ever]

this does sound big.   doesn't seem to have affected the price yet though.

[wormbog]

One important point to consider is that while Fidelity will allow investing in the Bitcoin Trust, the Bitcoin Trust is limited to accredited investors (>$1M in assets or >$200K annual income or a few other conditions).  So grandma (unless she is an accredited investor) won't be using this even if she has a Fidelity brokerage account.   Still it should help the Bitcoin ETF convince regulators of the need and merit for the ETF.

This is the big question for me. I've asked my IRA administrator to find out the details.

[LiteCoinGuy]

But in any event, while you or I would rather just store our own bitcoins and avoid the fees, it's reasonable for the less technically-savvy. Additionally, this allows investors to gain exposure to bitcoin through an already-understood vehicle (ie, your CPA will be able to figure out the tax consequences easily). And the fees will likely remain pretty negligible compared to the overall gain or loss, for quite some time, due to the fact that bitcoin will remain volatile for a while; we're still obviously in wild price-discovery mode for a fascinating and far-reaching new technology, asset-class, and monetary system.

If you don't understand bitcoin enough to figure out how to properly store them safely then you probably shouldn't be pumping $25,000+ into them.

thats not correct in my opinion. the cryptoworld needs services like this, otherwise you will never get the big money in the btc-space. and i guess the fees of that services will go down when more services pop up.

[Melbustus]

But in any event, while you or I would rather just store our own bitcoins and avoid the fees, it's reasonable for the less technically-savvy. Additionally, this allows investors to gain exposure to bitcoin through an already-understood vehicle (ie, your CPA will be able to figure out the tax consequences easily). And the fees will likely remain pretty negligible compared to the overall gain or loss, for quite some time, due to the fact that bitcoin will remain volatile for a while; we're still obviously in wild price-discovery mode for a fascinating and far-reaching new technology, asset-class, and monetary system.

If you don't understand bitcoin enough to figure out how to properly store them safely then you probably shouldn't be pumping $25,000+ into them.

That's a pretty myopic point of view. There are certainly people who can easily grasp the economic ramifications without wanting to deal with the minutia of M of N paper wallets and encrypted backups. You need to understand the value of people's time. Someone who has plenty of money should value their time quite highly (we're all mortal, after all (barring some singularity-induced shift in the meaning of life)). Spending days learning how to securely deal with bitcoins (and it would indeed be days for someone not already tech-savvy) just isn't a good use of time for a lot of people.

Also, pay attention to my note about the BIT being an investment vehicle that's already understood with regard to tax consequences. That's huge for the target demographic.

[jamesg]

One important point to consider is that while Fidelity will allow investing in the Bitcoin Trust, the Bitcoin Trust is limited to accredited investors (>$1M in assets or >$200K annual income or a few other conditions).  So grandma (unless she is an accredited investor) won't be using this even if she has a Fidelity brokerage account.   Still it should help the Bitcoin ETF convince regulators of the need and merit for the ETF.

On top of this, the IRA needs to be self directed.

[jamesg]

Looks like Fidelity is backpedaling...

http://blogs.marketwatch.com/thetell/2013/12/12/fidelity-halts-bitcoin-investments-from-iras/

[TheJacob]

Looks like Fidelity is backpedaling...

http://blogs.marketwatch.com/thetell/2013/12/12/fidelity-halts-bitcoin-investments-from-iras/

Just a matter of time before someone allows it. Especially if they are getting a kickback from the trust(which they probably will).

[DeathAndTaxes]

Looks like Fidelity is backpedaling...

http://blogs.marketwatch.com/thetell/2013/12/12/fidelity-halts-bitcoin-investments-from-iras/

Lame so now they are even telling accredited investors (who generally can do whatever they want with their money, different rules for the rich) they can't invest in this legitimate investment.  I mean it isn't that big of a deal because any high net worth individual could open a self directed IRA with another trustee faster than you can make a phone call but it is still lame on Fidelity part.

[DeathAndTaxes]

But in any event, while you or I would rather just store our own bitcoins and avoid the fees, it's reasonable for the less technically-savvy. Additionally, this allows investors to gain exposure to bitcoin through an already-understood vehicle (ie, your CPA will be able to figure out the tax consequences easily). And the fees will likely remain pretty negligible compared to the overall gain or loss, for quite some time, due to the fact that bitcoin will remain volatile for a while; we're still obviously in wild price-discovery mode for a fascinating and far-reaching new technology, asset-class, and monetary system.

If you don't understand bitcoin enough to figure out how to properly store them safely then you probably shouldn't be pumping $25,000+ into them.

That's a pretty myopic point of view. There are certainly people who can easily grasp the economic ramifications without wanting to deal with the minutia of M of N paper wallets and encrypted backups. You need to understand the value of people's time. Someone who has plenty of money should value their time quite highly (we're all mortal, after all (barring some singularity-induced shift in the meaning of life)). Spending days learning how to securely deal with bitcoins (and it would indeed be days for someone not already tech-savvy) just isn't a good use of time for a lot of people.

Also, pay attention to my note about the BIT being an investment vehicle that's already understood with regard to tax consequences. That's huge for the target demographic.

This.  There are plenty of financially successful people who have other people manage their money.  They always have, they always will.  Saying they shouldn't be putting a small portion of their wealth into Bitcoin just because they don't understand it at a nuts and bolts level is just short sighted.  Most people don't understand internet security enough to know how online banking keeps their account safe should they be prohibited from using online banking or engaging in eCommerce?

When people don't know something often the solution is to use the services of someone who does know.

[FandangledGizmo]

When I think about the TPTB interfering with BTC, I always imagine a T-Rex wildly flailing his little arms at a massive incoming asteroid.

[thegolden24]

"Fidelity Investments is no longer allowing clients to invest in the virtual currency bitcoin through SecondMarket’s Bitcoin Investment Trust, a representative for Fidelity told MarketWatch on Thursday."

“On an individual basis, we allowed an investor to invest in that Bitcoin Investment Trust,” said Rob Beauregard, director of public relations at Fidelity, in a telephone interview Thursday morning. “We are no longer allowing that.”

This was released on MarketWatch about 2 hours ago...