For Matthew Roed, Social Security is looking a lot less promising than the money he’s stashed away in his BitcoinIRA.
Roed is a registered nurse living in Golden Valley, Minnesota, and he says he’s spent 16,000 hours researching all things bitcoin. His conclusion? Investing in the cryptocurrency is the key to retiring well, and the best way to do it is through a tax-free, self-directed Individual Retirement Account, or IRA.
“Since bitcoin is legally classified as property by the U.S. government and my crypto is inside of an IRA, I knew that I would greatly reduce my taxable expenses due to exponential growth,” said Roed.
At today’s prices, the gamble has so far paid off.
The MBA grad, father, and husband initially invested $30,000 into his BitcoinIRA. Right now, he says that his retirement portfolio is up to $250,000,
While it’s down from its peak of $500,000, Roed still feels vindicated in his conviction that bitcoin is the future.
“No one wanted to listen to me at that time, including my own family,” he said. “I became reclusive and used my frustration to push more and more into getting involved in that market.”
BitcoinIRA launched in May of 2016, offering investors the tax-advantage of an IRA, plus the return of a high-risk, high-reward alternative asset class. It’s similar in nature to other IRAs, except that instead of being funded by gold, cash, and bonds, it’s backed by bitcoin.
The company has more than 100,000 individual account holders, including clients as young as 18. But chief operating officer Chris Kline tells CNBC that 75% of account holders are 45 and over. “It’s not a young kids’ game anymore,” he said.
BitcoinIRA isn’t just dealing in bitcoin either. It now includes a long list of cryptocurrencies, including ethereum and litecoin.
Duke University’s Campbell Harvey thinks diversification is the right call.
“To have a portfolio that has exposure…to a single crypto like bitcoin, that doesn’t make any sense, because while bitcoin is the most important one right now, its share of the overall capitalization of cryptos has decreased through time. There are so many other tokens out there,” Harvey said.
When CNBC first profiled BitcoinIRA in 2017, it served $6 million in transactions for 700 account holders. This month, it passed $1.5 billion in all-time transactions.
There were also far fewer players in the crypto retirement space. The market is now flooded with options.
A recent survey of financial advisors shows a significant shift to cryptocurrencies. 14% of the more than 500 financial advisors included in the report said they now use or recommend cryptocurrency to clients, versus fewer than 1% in 2019 and 2020.
IRA custodian Kingdom Trust offers users the option to diversify in 20 different cryptocurrencies. CEO Ryan Radloff tells CNBC that $2 billion of the $17 billion that it holds for clients is now in cryptocurrency. That’s up from $350 million a year ago.
“The amount of people interested in including bitcoin in their retirement savings…is increasing exponentially,” said Radloff. “People don’t want zombie retirement accounts that only allow you to invest in three target-date funds. They want to have more choice in what they do with their hard-earned money, and they want access to hard-assets that will increase in value over a long time horizon.”
IRA vs. Roth IRA vs. 401(k)
Crypto-backed retirement portfolios may rapidly be gaining in popularity, but there are still some major limitations.
For one, while there are multiple ways to invest your savings for retirement – be it an employer-sponsored 401(k) or a Roth IRA – very few of these vehicles actually allow for an alternative asset like gold or crypto.
That’s why the primary retirement vehicle for holding crypto is self-directed IRAs, explains Shehan Chandrasekera, a CPA and head of tax strategy at crypto tax software company CoinTracker.io.
As the name suggests, it’s an account you open with a custodian, you make all investment decisions, and your income is tax sheltered until your retirement. Kingdom Trust and BitcoinIRA both follow this model.
“So far as retirement accounts go, right now, with bitcoin, it’s IRAs, IRAs, IRAs,” explained Onramp Invest chief executive Tyrone Ross. Onramp sells software that helps financial advisers keep track of client cryptocurrency investments.
“Because it’s considered property by the IRS…that is why you’re seeing the self-directed IRA space explode,” continued Ross. “There’s a lot of regulation to get through before you get it into the 401(k) space.”
There are exceptions. A small 401(k) provider called ForUsAll announced last month that it is now allowing participants to allocate up to 5% of their retirement funds into 50 different crypto assets including bitcoin, which will be custodied and managed by Coinbase.
Companies like BitWage and Digital Asset Investment Management are also trying to fold crypto into traditional retirement plans offered by employers.
But Chandrasekera says that “generally speaking, 99% of 401(k) plans don’t offer bitcoin services,” so there is still a ways to go until bitcoin hits mainstream retirement platforms.
Fidelity, for example, tells clients that retail brokerage customers cannot buy or sell any cryptocurrencies at Fidelity, though they can, theoretically, get exposure to the bitcoin trade through crypto-associated companies trading on the public markets. Same goes for Charles Schwab.
Volatility risk versus tax savings
Roed spoke to CNBC after wrapping a 14-hour night shift. Those post-work hours are when the rehabilitation staff nurse invests the most time into researching ways to invest in cryptocurrencies.
Part of why he settled on BitcoinIRA has to do with the company’s staking program. Roed lends third parties his bitcoin and in return, he earns an annual percentage rate, or APR, for the risk. “It’s something like 2% per year,” he said.
This helps to offset the $240 annual account fee, plus the average transaction fees of 1% to sell and 5.5% to buy.
Kline says that clients can earn up to 6% annual percentage yield on cash and cryptocurrency, which helps balance out the fees.
Another major consideration? The volatility of bitcoin.
The world’s most popular cryptocurrency is trading at about half of what it was worth in April.
“We don’t see that volatility in, for example, the stock market,” explained Harvey.
“It’s naive to think that bitcoin is just going to keep on going up. There is going to be some limit, and people need to deeply consider that,” he said.
Beyond the volatility risks, the Securities and Exchange Commission has also warned of the risk of fraud when participating in self-directed IRAs which deal in cryptos.
But Kline remains optimistic. He ran CNBC through a case study of one client who purchased about $1.5 million worth of bitcoin in April of 2020, when the token was trading at around $7,335. At today’s value, his investment is worth well over $6 million.
But ultimately, Kline says it’s the tax break that makes BitcoinIRA a slam dunk for those looking to deal in cryptos.
If a taxpayer at an average income level were to sell his bitcoin today, he would pay no tax for the crypto held in his BitcoinIRA. If it were in a Coinbase account, this same person would face a 22% short-term capital gains tax or 15% for a long-term holding.
“Pretty clear quantitative reasoning to put an asset like bitcoin in an IRA setting,” said Kline.
CORRECTION: This article has been updated to show that registered nurse Matthew Roed spent 16,000 hours researching cryptocurrencies, not 160,000 hours. Also, it clarifies that 75% of BitcoinIRA account holders are age 45 and over.
How Google’s Waze has changed from its early days as car travel is remade
Waze app with icon showing police
In this weekly series, CNBC takes a look at companies that made the inaugural Disruptor 50 list, 10 years later.
Nobody enjoys sitting in bumper-to-bumper traffic jams, getting an arrival time delayed due to street construction and gaining more road rage by the minute as a result. Waze, the crowdsourcing navigation app, is continuing to find ways to make frustrating road bumps a little more bearable.
Waze users – also known as “Wazers” – provide information on things like stopped cars, road work, gas prices and police activity during their commutes. The app then collects this real-time data and updates its maps accordingly, giving users the most up-to-date information on travel times and other potential traffic burdens. What was once a small Israeli startup now has more than 140 million monthly users worldwide.
In 2013 – shortly after the app made the inaugural CNBC Disruptor 50 list – Alphabet‘s Google acquired Waze, reportedly for more than $1 billion. The addition of Waze to the Google portfolio was expected to help Google improve features on its own navigation app, Google Maps. Google Maps is still the most popular navigation app today and relies more heavily on historical data to map out the best path to one’s destination. On the other hand, Waze’s unique crowdsourcing technique allows it to determine the fastest route with the most recent information, and it’s only available for car and motorbike use.
The app’s innovation has had led to backlash in the past, for potentially distracting drivers, who must use their phones behind the wheel to make reports on Waze. In 2018, it faced threats of legal action by Los Angeles lawmakers for suggesting shortcuts that ended up causing more congestion on side roads not prepared to handle high amounts of traffic. Uri Levine, co-founder and former Waze president, said at the time that he disagreed with the complaints.
“All roads are the public domain and therefore the right of everyone to use,” Levine said. “In that sense, Waze redistributes traffic to create a better traffic situation for everyone.”
The company also struggled at the beginning of the Covid-19 pandemic. With a decrease in individuals traveling, Waze reported in April 2020 that its users across the globe were driving 60% fewer miles compared to two months prior, with driving in Italy – one of the first countries to see the impacts of Covid-19 – dropping more than 90%. As a result, Waze laid off 5% of its global workforce in September 2020 and permanently closed offices in the Asia-Pacific and Latin America regions.
The company also shutdown Waze Carpool in September, a service connecting Wazers with similar commutes to carpool. The six-year-old service was intended to help Wazers cut down on gas costs while creating less traffic congestion during busiest travel times each day, but the pandemic caused too many changes in work driving patterns to be a priority, with errand trips and travel now the dominant uses for Waze.
Despite these challenges, innovations within the app have kept Waze users consistently coming back to the platform. It’s one of the top navigation choices among Uber and Lyft drivers. Drivers using Waze can be entertained as they’re directed to their desired location through voices from celebrities like DJ Khaled, Arnold Schwarzenegger and T-Pain. Partnerships with popular music streaming services such as Spotify, Pandora and iHeartRadio allow Waze users to stream music directly through the Waze app as they navigate to their destination.
Waze also flaunts its ability to do more for the greater good. The app was used by FEMA during Hurricane Sandy to provide information on available fuel locations in the midst of gas shortages; it helped provide accurate information on Covid-19 testing centers at the beginning of the pandemic.
Local governments are also able to partner with Waze through a program called Waze for Cities, which establishes two-way data sharing through the app and government partners that helps communities with city planning and Waze with more accurate traffic monitoring.
New top officials have joined the company relatively recently, with Neha Parikh taking on the role of CEO in June 2021 and CMO Harris Beber joining in April 2022. Beber previously served as CEO at Vimeo, while Parikh was the president of Expedia-owned Hotwire and currently sits on the board of Carvana.
“Why should anybody feel emotional about a navigation app? Yet people do, including me,” Parikh said at the Skift Global Forum in October. “It’s not just a one-way app that uses technology. It is a two-way ecosystem where people actually contribute to help each other.”
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Elon Musk showed off updates to his brain chips and said he’s going to install one in himself when they are ready
Neuralink logo displayed on a phone screen, a silhouette of a paper in shape of a human face and a binary code displayed on a screen are seen in this multiple exposure illustration photo taken in Krakow, Poland on December 10, 2021.
Jakub Porzycki | Nurphoto | Getty Images
Elon Musk’s health tech venture Neuralink shared updates to its brain-implant technology during a “show and tell” recruitment event Wednesday night. Musk said during the event that he plans to get one of the implants himself.
Musk said two of the company’s applications will aim to restore vision, even for people who were born blind, and a third application will focus on the motor cortex by restoring “full body functionality” for people with severed spinal cords. “We’re confident there are no physical limitations to restoring full body functionality,” Musk said.
Neuralink could begin to test the motor cortex technology in humans in as soon as six months, Musk said.
“Obviously, we want to be extremely careful and certain that it will work well before putting a device in a human, but we’re submitted, I think, most of our paperwork to the FDA,” he said.
But he also claimed he plans to get one himself. “You could have a Neuralink device implanted right now and you wouldn’t even know. I mean, hypothetically. In one of these demos, in fact, in one of these demos, I will,” he said. He reiterated that on Twitter after the event.
Since none of Neuralinks’ devices have been tested on humans or approved by the FDA, Wednesday’s announcements warrant skepticism, said Xing Chen, assistant professor in the Department of Ophthalmology at the University of Pittsburgh School of Medicine.
“Neuralink is a company, it doesn’t have to answer to shareholders,” she told CNBC. “I don’t know how much oversight is involved, but I think it’s very important for the public to always keep in mind that before anything has been approved by the FDA, or any governmental regulatory body, all claims need to be very, very skeptically examined.”
Neuralink was founded in 2016 by Musk and a group of other scientists and engineers. It strives to develop brain-computer interfaces, or BCIs, that connect the human brain to computers that can decipher neural signals.
Musk invested tens of millions of his own personal wealth into the company and has said, without evidence, that Neuralink’s devices could enable “superhuman cognition,” enable paralyzed people to operate smartphones or robotic limbs with their minds someday, and “solve” autism and schizophrenia.
The company’s presentation Wednesday echoed these lofty ambitions, as Musk claimed that “as miraculous as it may sound, we’re confident that it is possible to restore full body functionality to someone who has a severed spinal cord.”
Musk showed footage of a monkey with a computer chip in its skull playing “telepathic video games,” which Neuralink first debuted over a year ago. The billionaire, who is also the CEO of Tesla, SpaceX and the new owner of Twitter, said at the time that he wants to implant Neuralink chips into quadriplegics who have brain or spinal injuries so that they can “control a computer mouse, or their phone, or really any device just by thinking.”
Neuralink has come under fire for its alleged treatment of monkeys, and the Physician’s Committee for Responsible Medicine called on Musk Wednesday to release details about experiments on monkeys that had resulted in their internal bleeding, paralysis, chronic infections, seizures, declining psychological health and death.
Jeff Miller/University of Wisconsin-Madison
Neuralink’s flashy presentations are unusual for companies in the medical devices space, said Anna Wexler, an assistant professor of Medical Ethics and Health Policy at the Perelman School of Medicine at the University of Pennsylvania. She said it’s risky to encourage people who have serious disabilities to get their hopes up, especially if they could possibly incur injuries as the technology is implanted during surgery.
Wexler encouraged people to put on their “skeptic hat” about Neuralink’s big claims.
“From an ethical perspective, I think that hype is very concerning,” she said. “Space or Twitter, that’s one thing, but when you come into the medical context, the stakes are higher.”
Chen, who specializes in brain-computer interfaces, said Neuralink’s implants would require subjects to undergo a very invasive procedure. Doctors would need to create a hole in the skill in order insert the device into the brain tissue itself.
But even so, she thinks some people would be willing to take the risk.
“There’s quite a few disorders such as epilepsy, Parkinson’s and obsessive-compulsive disorder in which people have received brain implants and the disorders have been treated quite successfully, allowing them to have an improved quality of life,” Chen said. “So I do feel that there is a precedent for doing this.”
Wexler said she believes the decision would ultimately come down to an individual patient’s personal risk-benefit calculation.
Neuralink is not the only company trying to innovate using brain-computer interfaces, and many have made big strides in recent years. Blackrock Neurotech is on track to bring a BCI system to market next year, which would make it the first commercially available BCI in history. Synchron received FDA approval in 2021 to begin a clinical trial for a permanently implanted BCI, and Paradromics is reportedly gearing up to begin in-human testing in 2023.
Broke and down to one credit card: Former FTX CEO Sam Bankman-Fried claims he committed no fraud
Striking a contrite tone, former FTX CEO Sam Bankman-Fried said he “didn’t do a good job” at upholding his responsibilities to regulators, customers, and investors in a hotly anticipated conversation with CNBC’s Andrew Ross Sorkin at the Dealbook Summit.
“I didn’t ever try to commit fraud on anyone,” Bankman-Fried said. “I saw it as a thriving business and I was shocked by what happened this month.”
“I’ve had a bad month,” Bankman-Fried added later.
“We completely failed on risk,” Bankman-Fried continued. “That feels pretty embarrassing, in retrospect.”
Tom Williams | CQ-Roll Call, Inc. | Getty Images
Bankman-Fried appeared by video feed from the Bahamas, Sorkin said. “I’ve been in the Bahamas for the last year,” Bankman-Fried said when asked about why he remained in the island nation.
Sorkin asked Bankman-Fried what motivated his acquisitions in the crypto industry, given the size of Alameda’s borrowing from companies Bankman-Fried intended to acquire.
Bankman-Fried claimed that he believed that by the middle of 2022, Alameda had repaid all lines of credit to various borrowing desks. But Alameda still owes BlockFi over $670 million, according to court filings.
“What are your lawyers telling you right now? Are they suggesting it’s a good idea for you to be speaking?” Sorkin asked the former billionaire.
“No, they’re very much not.”
“The time that I really knew there was a problem was November 6,” Bankman-Fried said, after Alameda’s sizable FTT position was exposed by Coindesk. “When we looked at that, there was a potential serious problem.”
“Alameda had taken a huge hit” by that point. “We were seeing a run on the bank start,” Bankman-Fried said.
“I was nervous [when] the Alameda balance sheet” was exposed by Coindesk, Bankman-Fried said, but expected the damage was going to be limited to Alameda, not an “existential” crisis for FTX.
Sorkin asked Bankman-Fried why FTX and Bankman-Fried even had access to customer money.
“I wasn’t running Alameda, I didn’t know exactly what was going on, I didn’t know the size of their position,” Bankman-Fried said. “A lot of these are things I’ve learned over the last month [in the days leading up to bankruptcy.]”
New leadership at FTX said that Bankman-Fried exercised significant control over the entire empire.
Sorkin pressed Bankman-Fried on Alameda’s gambling on questionable cryptocurrencies, reading a letter out from an investor who lost his life savings of $2 million.
“The U.S. platform is fully solvent and funded,” Bankman-Fried claimed. “I believe withdrawals could be opened up today and be made whole.”
“Can I ask you about the drugs?” Sorkin said. “It’s funny hearing this. I have half a glass of alcohol a year,” Bankman-Fried responded.
The FTX founder repudiated claims of wild partying and off-label drug use, saying that FTX functions consisted of “board games,” or “dinner parties.”
Bankman-Fried claimed he was unaware of the Alameda exposure. In 2019, he said, 40% of FTX’s volume was from Alameda. By 2022, Bankman-Fried claimed, that number was down to 2%, which led him to believe that FTX’s exposure was lessened.
Sorkin continued to press Bankman-Fried on the lending of customer assets. Bankman-Fried demurred.
“In 2018, FTX didn’t have bank accounts,” Bankman-Fried said as justification for why users were asked to wire funds to an account in Alameda’s name instead of directly to FTX.
Bankman-Fried has engaged with the media only sporadically. “F*** regulators,” he told a Vox reporter in a Twitter message.
“I f***** up,” he wrote in another Tweet.
FTX was once hailed as the poster child of responsible crypto. Regulators and lawmakers looked to Bankman-Fried as the future of crypto regulation, a reputation that Bankman-Fried cultivated through appearances before Congress and deepened through generous political contributions.
Bankman-Fried was already known as one of the largest donors to Democratic candidates. He claimed in a recent interview that he gave equally generously to Republican causes, through so-called “dark pool” contributions.
Reporters, Bankman-Fried said, “freak the f*** out if you donate to Republicans.”
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