Written by: jk
On Thursday, local time in the United States, the Financial Times reported that Trump is preparing to open cryptocurrency, gold, and private equity to the $9 trillion U.S. retirement market. According to three insiders, Trump is expected to sign an executive order as early as this week to allow alternative investments beyond traditional stocks and bonds in 401k retirement plans. These investments will involve a wide range of asset classes, from digital assets to metals, as well as funds focused on corporate acquisitions, private loans, and infrastructure deals. The aforementioned insiders stated that the executive order will instruct regulators to investigate the barriers faced by professionally managed funds that incorporate alternative investments for 401k savers.
This policy shift will impact the $8.9 trillion U.S. pension market. Even if only 10% of 401k funds flow into the cryptocurrency market, it would inject $870 billion into the current $3.92 trillion global cryptocurrency market, equivalent to a 22.2% market increase. This is not only a significant shift in U.S. financial policy but also a historic turning point in the global digital asset landscape.
What is a 401k (the mainstream retirement plan in the U.S.)?
A 401k is the most common retirement savings tool in the U.S. workplace, allowing employees to make long-term investments for retirement with tax advantages. Employees can choose to contribute a portion of their salary to a traditional 401k (pre-tax contributions, taxed upon withdrawal) or a Roth 401k (after-tax contributions, tax-free upon withdrawal) account, and employers typically match contributions to a certain extent. The funds in the account can be invested in various assets, with specific investment options determined by the platform provided by the employer, usually including: equity funds (such as S&P 500 index funds), bond funds, money market funds, and target date funds (which automatically adjust risk based on retirement year).
The range of investment options is set by the provider of the 401k plan (such as Fidelity, Vanguard, etc.), and individuals cannot freely buy and sell any securities as they can in an IRA. Regarding withdrawal rules, funds in a 401k account can be withdrawn without penalty after age 59 and a half, but traditional 401k still requires income tax; if withdrawn before this age, a 10% early withdrawal penalty plus applicable taxes usually applies, unless specific exemptions are met (such as permanent disability, significant medical expenses, court-ordered alimony, first-time home purchase, etc.). In summary, the 401k plan combines tax advantages, employer subsidies, and diverse investment channels, making it a core asset accumulation tool in the U.S. retirement system.
Specifically, there was not a complete ban on retirement plans investing in cryptocurrencies; however, during the previous administration, the U.S. Department of Labor explicitly warned employers in 2022 to be "extremely cautious" in allowing retirement accounts to engage with crypto assets, arguing that their high volatility and speculative nature do not align with the fiduciary duty to act in the best interest of employees, which led many employers to avoid related options. Additionally, most 401k providers (such as Vanguard, Schwab) have not opened cryptocurrency investment channels, and the technological access and compliance support are not mature. Even leading institutions like Fidelity that have launched crypto account features require employers to actively enable them, resulting in a very low actual activation rate. Furthermore, due to concerns about legal liability, employee asset losses, and the long-term security of pensions, most employers maintain a conservative stance on offering crypto investment options. These factors combined have resulted in a situation where, although not legally prohibited, 401k investments in cryptocurrencies have long been in a state of "theoretically feasible, practically limited."
Now, the executive order will instruct regulators to investigate the barriers faced by professionally managed funds that incorporate alternative investments for 401k savers.
A Massive Pool of Funds: $8.9 Trillion Market
The scale of the U.S. 401k retirement market is beyond imagination. As of the third quarter of 2024, the total assets in 401k plans reached $8.9 trillion, serving over 70 million active participants across 715,000 plans. This scale accounts for about 20% of the total $44.1 trillion in U.S. retirement assets, making it the largest defined contribution pension market in the world.
Currently, 401k funds are primarily invested in traditional assets: 66% are invested in mutual funds, with equity funds dominating, and bond allocations increasing with age. The average account balance is $132,300, with younger investors having a higher proportion of equity allocations, while bond allocations typically do not exceed 6%.
The current cryptocurrency market size is $3.92 trillion, with Bitcoin holding a 60.4% market dominance, valued at approximately $2.37 trillion. Despite its large size, it remains relatively small compared to traditional financial markets. The assets under management for U.S. spot Bitcoin ETFs are about $12.3 billion, with BlackRock's iShares Bitcoin Trust (IBIT) alone accounting for $7 billion, or 50% of total crypto ETF assets.
If the executive order is signed, what will be the market impact?
Based on detailed market data analysis, if 10% of 401k funds enter the crypto market, the following impacts will occur:
Scale of fund inflow:
10% of total 401k assets = $870 billion, equivalent to 22.2% of the current total market capitalization of the crypto market
This is 36.7% of Bitcoin's market value
More than 70 times the current total assets of all cryptocurrency ETFs
The influx of large institutional funds will fundamentally change the market structure. Bitcoin's market dominance may further rise to 70-75%, with a surge in institutional-level infrastructure demand, significantly increasing custody services and compliance requirements. Initially, this may increase volatility, but in the long term, it will significantly reduce volatility and enhance market depth and stability.
In an ideal model considering only supply factors, Bitcoin's price is linearly positively correlated with its market value, with a correlation coefficient of nearly 1. Based on the current market value level of approximately $2.4 trillion, if influenced by a 10% influx from the retirement market, it could potentially grow to $3 trillion, with prices expected to be in the range of $150,000 to $170,000, and a central valuation of about $160,000. This prediction fully considers the impact of a slight increase in supply.
New Opportunities for Wall Street Giants
According to the Financial Times, in recent years, private equity giants like Blackstone and Apollo have actively sought to enter the U.S. 401k retirement market and have begun establishing partnerships with large asset management firms and retirement platforms such as Vanguard, Empower, and Great Gray Trust. This move is seen as a key breakthrough for the private equity industry to open new funding sources after traditional institutional fundraising (such as pensions and endowment funds) faced obstacles. Industry insiders predict that if they can successfully embed themselves in 401k plans, the private equity industry is expected to attract hundreds of billions of new asset inflows.
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