Fidelity Investments – one of the largest investment and trading companies out there – has announced that customers can place cryptocurrencies like bitcoin into their 401Ks and retirement funds.
Fidelity Allows Users to Invest in Crypto with Their 401Ks
Adam Dell – the founder of Domain Money – believes this is one of the biggest boosts crypto has been given in recent years. During an interview, he commented:
It’s a recognition that investors are looking for access to this asset class, so we think it’s a great development for the industry.
In addition to individual customers being able to add crypto to their portfolios, Fidelity is also allowing businesses that roll out 401K benefits to their employees to offer the crypto option to workers. The option will be available for companies across the nation to add later in the year.
This makes Fidelity the first major retirement plan provider to provide such an option to its users. As much as 20 percent of a person’s individual retirement account can be allocated to assets like bitcoin, though there has been a warning that plan sponsors may work to limit this figure in the future. Dave Gray – head of workplace retirement offerings and platforms at Fidelity – mentioned:
There is growing interest from plan sponsors for vehicles that enable them to provide their employees access to digital assets in defined contribution plans.
In response to comments suggesting that individuals wouldn’t be safe by adding bitcoin and other forms of crypto to their retirements, Dell stated:
Despite the volatility associated with cryptocurrencies as an asset class, as an investment opportunity, the long-term prospects of these technologies and what blockchains can do to our underlying banking systems are quite significant, and so investors who recognize that opportunity and have a long-term view may be well suited to use their 401(k) as a vehicle to invest in those. Each individual needs to determine for themselves what level of risk is appropriate given their situation.
Volatility Isn’t a Huge Issue
He further stated that while some analysts argue one should only put somewhere between two and five percent of their investments and/ or retirement savings into crypto given the volatility the space has been suffering from as of late, he rebuked this with:
Some experts suggest between two and five percent of your investable assets makes sense to put into cryptocurrencies. Our view is that the long-term prospects of blockchain technologies are meaningful, and the opportunity set is quite large. Innovations that typically come along, you either need to be a venture capitalist or wait for the companies to go public to participate. That’s not the case with cryptocurrencies.
He concluded that bitcoin and crypto will likely compose the banking sector of the future, and thus Fidelity is giving everyone an early chance to get used to that.