Fidelity To Boost Crypto Adoption With Bitcoin 401(k) Plan

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Company-sponsored 401(k) retirement saving accounts in the US allow employees to take advantage of tax breaks as they save, whilst also having their retirement pot boosted by employee contributions.

A Boost To Bitcoin’s Mainstream Adoption

Cryptocurrency analysts hailed the latest announcement from Fidelity Investments as another step towards the mainstream for digital assets.

Fidelity is the single largest US-based provider of retirement plans, administering more than 20M individual accounts with over $2.7T in assets under management.

Analysts at the WSJ speculated that “Fidelity’s embrace of bitcoin could prompt wider acceptance among employers” and commented that “the endorsement of the nation’s largest retirement-plan provider suggests crypto investing is moving further into the mainstream.”

Dave Gray, Fidelity’s head of workplace retirement offerings and platforms, said following the announcement that “we have seen growing and organic interest from clients”, especially those with younger employees.

“There is a need for a diverse set of products and investment solutions for our investors,” he commented. “We fully expect that cryptocurrency is going to shape the way future generations think about investing for the near term and long term”.

Regulator Pushback

Fidelity’s announcement comes after the US Department of Labour (DoL) issued a warning to employees about allocating employee 401(k) saving pots towards digital assets last month.

Employers should “exercise extreme care before they consider adding a cryptocurrency option to a 401(k) plan’s investment menu”, the DoL said. The department warned employers planning to offer cryptocurrencies in 401(k) plans to expect to be pressed on how they can “square their actions with their duties of prudence and loyalty under U.S. pension law”.

Given bitcoin and the wider cryptocurrency market’s reputation for volatility coupled with warnings from regulators, it remains to be seen to what extent often risk-averse employers choose to take up Fidelity’s bitcoin 401(k) offering.

Wild Bitcoin Swings A Thing Of The Past – Fidelity Executive

Fidelity’s decision to offer employers offer 401(k) account allocation towards bitcoin chimes with a view recently expressed by one of the company’s executives Jurrien Timmer that the wild swings seen in BTC/USD in recent years is a thing of the past.

Timmer commented on Twitter that “until recently, Bitcoin would often overshoot its intrinsic value to the upside during bull markets and to the downside during bear markets… It was a momentum game with little to no resistance, until the trend reached exhaustion”.

However, Timmer noted that bitcoin is now more closely following a demand curve that is based on bitcoin network growth/the rise in the number of users, as opposed to prior supply curves.

That makes bitcoin a more efficient two-way market, Timmer said. “As Bitcoin’s value becomes better understood by more and more investors, there could be more efficient accumulation when Bitcoin swoons, and more determined distribution when it moons… That’s what makes a two-way market.”