How to Invest in Crypto with a Self-Directed IRA (5 Steps)

crypto self-directed ira

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A self-directed IRA in cryptocurrency is a great way to diversify your retirement portfolio. If your retirement funds are in a regular IRA or 401k, today’s markets might make you weary. 

Will your retirement savings be there when you need them? Have you diversified enough? Could you even diversify enough in a traditional retirement savings account?

Given the state of the stock market, traditional investments seem less and less likely to provide the significant returns they once promised.

So, it’s a good idea to look into other options. Below we discuss everything you need to know about starting a cryptocurrency IRA so that you can diversify your retirement savings.

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What is a Self-Directed IRA Crypto Account?

Self-directed IRA or SDIRA for short, are individual retirement accounts that can hold alternative asset investments.

While traditional IRAs allow you to invest in stocks, bonds, CDs, ETFs, and mutual funds, they prohibit you from making alternative investments. 

So, if you want to invest in real estate, precious metals, or digital currencies, you’ll need an SDIRA. A crypto SDIRA focuses those alternative investments in virtual currencies such as Bitcoin, Ethereum, and others.

You’ll use a specialized custodian or trustee to invest, and, ideally, you’ll set up an LLC to make the investments. Then, you’ll need to familiarize yourself with self-directed IRA cryptocurrency exchanges.

Unlike traditional IRAs, SDIRAs require you to manage them. You won’t have a financial manager investing on your behalf. That means you need to do your due diligence before making investments. 

The process may seem complicated, but it can also be lucrative. With a crypto SDIRA, you’ll be able to invest in a decentralized digital asset that’s not tied to a single nation’s economy.

Though cryptocurrency markets are volatile, they’re also likely to grow. For example, despite a rocky year, experts still believe Bitcoin will reach $100,000.

And investing your SDIRA funds into crypto offers several advantages that we’ll discuss in more detail below.

5 Steps to Setting Up a Crypto SDIRA

Setting up a crypto SDIRA seems complex, but it doesn’t have to be. Below, we break down the process into five simple steps.

Find a reputable custodian

The IRS requires SDIRAs to utilize a custodian. The custodian is a financial institution that holds your SDIRA investments.

Custodians differ in specialization. So, a custodian that will hold investments for your precious metals SDIRA won’t work for your crypto SDIRA.

We like and iTrustCapital. Both are easy to work with and offer top-notch security, which is crucial for virtual currency investments.

Setup your SDIRA account

Once you choose a custodian, you can set up and fund your SDIRA account. Setting up the account is relatively simple, and sites like Bitcoin IRA and iTrustCapital will walk you through the process. 

There are three ways to fund your SDIRA. You can rollover funds, transfer funds from an existing IRA, or make a direct contribution. 

If you roll over funds from a 401k or another retirement account, you can use either a direct or indirect rollover.

A direct crypto IRA rollover doesn’t have fees and avoids tax withholdings. An indirect rollover means you’ll receive a check from your existing retirement account that you must deposit into your SDIRA.

This option typically incurs distribution fees of 10 to 20 percent. If you choose to make a direct or cash contribution, pay attention to IRS limits.

As of 2022, the maximum annual contribution is $6,000 for those under 50 years old and $7,000 for those fifty and older.

Set up an LLC

The next step is to set up an LLC or limited liability company. Your IRA will own the LLC, and all income and expenses related to the IRA will flow through the LLC.

This SDIRA structure is often called a checkbook control LLC because it gives you “checkbook control” over IRA funds.

Checkbook control allows you, as the account owner, to make quick transactions vital in the ever-changing crypto market. 

Once you establish your IRA’s LLC, you’ll open a business checking account in your LLC’s name. That account is what you’ll use to invest in crypto assets. 

There are several other advantages to creating an IRA LLC. This structure may reduce transaction fees, and it can provide liability protections. 

Plus, setting up an LLC is relatively easy. You’ll choose a name, register with the state, and apply for an EIN. In some states, you’ll also need an operating agreement.

Below, we’ll discuss why an operating agreement is crucial to an IRA LLC, even if your state doesn’t ask for it.

Submitting paperwork

After establishing your LLC, you’ll need to submit a few important papers to your custodian and, possibly, to the bank that holds your business checking account.

These papers include an operating agreement and a buy direction letter for private placement. 

The operating agreement is a core document you’ll refer to should any issues arise with your IRA LLC.

It lays out tax provisions, prohibited transactions, and special management provisions. Your custodian must have a copy. 

The buy direction letter for private placement is also crucial because it directs your custodian to invest IRA funds into your IRA LLC.

Start investing in crypto

Once you establish your IRA LLC and submit all the necessary paperwork to your custodian, you’re ready to start making investments.

You can invest by opening a crypto exchange account or using a private self-directed IRA wallet. You’ll put everything under your IRA LLC’s name and tax number.

Then, you can start your research and make investments as you see fit.

Benefits of a Crypto SDIRA

Choosing to use a crypto SDIRA comes with significant benefits. For one, it’s a great way to diversify your retirement portfolio.

Because cryptocurrency is unregulated and not tied to a specific currency or economy, it may remain more stable through times of socio-political flux. 

There are also crypto IRA tax benefits. Investing in crypto through an SDIRA retains the same tax benefits as a traditional IRA, plus tax deferral and tax-free gains.

This allows you to avoid capital gains taxes. Finally, with crypto investments, you’ll have blockchain security.

That means all of your investments are extremely secure. There’s very little risk of theft or fraud.

Best Crypto Self-Directed IRA Platforms

The best Bitcoin IRA companies provide exceptional security and low fees. It should also be easy to use. We recommend the following:

Bitcoin IRA

Bitcoin IRA was the first crypto IRA company. They’ve been offering 24/7 trading, secure storage, and $700 million in insurance protection since 2016.

In our opinion, Bitcoin IRA is the easiest self-directed IRA bitcoin platform to use. You can start crypto trading on the platform in minutes, and they support over 60 popular cryptocurrencies.

Click here to open a free account


iTrustCapital is another great SDIRA platform. They offer 29 forms of cryptocurrencies and extremely low fees.

While other companies charge as much as 15% on trades, iTrustCapital keeps its fees at 1%. Plus, they don’t charge any monthly fees for their services.

Click here to open a free account


Keeping your cryptocurrency investment secure should be a top priority, and BitIRA understands that.

They’re so confident in their security procedures they offer dollar-for-dollar insurance coverage on all digital assets.

So you can be sure your cryptocurrency holdings are safe.

Click here to open a free account

Next Steps

A crypto self-directed individual retirement account is a great idea if you want an alternative to traditional investments.

Cryptocurrency is decentralized and doesn’t rely on a particular government or economy, making it an excellent way to diversify your retirement funds.   

If you’re interested in starting a crypto IRA we can help you compare the best trading platforms in America.

Once you find the best one for your goals, you can start investing in crypto.


Investing your retirement in crypto tends to come with questions. Let’s see if we can answer a few of the most common ones.

Yes, you can hold Bitcoin in a self-directed IRA for Bitcoin and other cryptocurrencies.

For federal tax purposes, cryptocurrency is property. So, there is no capital gains tax when it’s held in an SDIRA.

You can invest your SDIRA LLC in cryptocurrency through Coinbase. The five steps we provide for investing your SDIRA in crypto work with any exchange platform.

Best Overall

Our #1 Bitcoin IRA Custodian

When it comes to customer service, fees, safety, and overall customer satisfaction, Bitcoin IRA checks all of the boxes.