Let’s talk about the reasons for today’s significant rise: Trump is pushing for 401(k) to invest in cryptocurrencies.
401(k) is different from the public pensions of the U.S. government that have already invested in cryptocurrencies; it is a pension plan primarily promoted by private enterprises in the U.S.
Public pensions are dictated by the fund managers who can decide to allocate funds to cryptocurrencies without any barriers. However, for 401(k), there are two layers of approval: the company selects major investment categories, and employees choose specific projects within those categories, meaning no one has absolute control.
Thus, pushing cryptocurrencies in 401(k) plans is quite difficult. Imagine this: if a company boss first selects the category for cryptocurrencies, and an employee invests in a specific cryptocurrency and makes a huge profit, the employee won’t share the gains with the company. But if the investment goes poorly, the employee will undoubtedly blame the company.
Moreover, during Biden's administration, the Department of Labor repeatedly advised caution and low-risk investments.
Do you think a cowardly company boss would dare to act, knowing employees might say, “The government didn’t allow this, and if I lose money, I’ll blame you”?
Therefore, Fidelity, as one of the largest 401(k) managers, is quite authoritative. It’s still very challenging to promote cryptocurrencies, with almost no company choosing to do so.
Previously, there was a smaller 401(k) manager called ForUsAll, primarily serving startups. They introduced a comprehensive cryptocurrency investment plan due to client demand, but they faced significant pressure during the bear market.
Now, what Trump aims to do is to have the Department of Labor issue guidelines stating that high-risk assets like cryptocurrencies and private equity should be allowed for companies to provide to employees, with the understanding that the risks are borne by the employees themselves.
This could be beneficial; it aligns everyone’s mindset. If employees lose money, they can’t blame the company using the government’s stance as an excuse. When Fidelity promotes cryptocurrencies, they can also offer some incentives, increasing operational flexibility.
Public pensions amount to $60 trillion, while 401(k) accounts hold $90 trillion. That’s a massive opportunity!
In fact, I believe that 401(k) is an excellent plan for regularly investing in cryptocurrencies. You contribute $1,000 every month, the company matches $500, and you can do this tax-free, locking it away until you’re 60. Just think about it, it’s exciting!
In this day and age, who in the younger generation still thinks about stable returns for pensions? They’d rather get welfare when they’re older. It’s all about the hustle!
If this portion of 401(k) funds goes into the cryptocurrency market locked away for decades, imagine how high the prices could rise! It’s hard to fathom, and it’s great news for us retail investors, haha.
One last question: if you could decide to allocate a portion of your monthly social security contributions to invest regularly in cryptocurrencies, would you do it?