When people think of the key driving force of U.S. financial markets, they often imagine hedge funds depicted in movies. Analysts and traders spend sleepless nights to find the next big move…
The reality is quite different. Кetirement money is the key player in financial markets. The huge $9 trillion retirement industry often determines the fate of a particular asset.
The key way to plan for retirement in the U.S. is to use 401k plans, which have tax benefits and may be matched by employers. Withdrawals from 401k plans are subject to penalties and taxes, so money that is put into those plans is considered long-term investments.
As money could not be easily withdrawn from 401k, retirement plans serve as the key pillar of U.S. financial markets, bringing stability and serving as cushion for any pullbacks. The money in 401k is either invested in assets, or ready to be invested in the near future.
Legislation determines what assets can be included in 401k plans. Crypto has recently entered the U.S. financial mainstream, so it is not on the list. In fact, 401k plans are focused on stock and bond mutual funds, so alternative investment options are not available to those saving for their retirement.
Financial Times have recently reported that U.S. President Donald Trump may use an executive order to allow crypto and other alternative investments to be included in 401k plans. According to the Financial Times article, Trump planned to sign this executive order in the near term. The White House noted that any announcements would come from Trump himself and urged investors to monitor official sources.
Such articles in leading business press indicate that either the current administration discusses the issue or the crypto industry is actively lobbying for the inclusion of crypto into 401k.
What could the potential decision to include crypto into 401k plans mean for the industry? it will open a large pool of funds for investment in crypto assets. Many investors do not have the desire or free funds to engage in additional investment activities outside of 401k plans. For such investors, the inclusion of crypto into 401k will provide an opportunity to invest in a new asset class.
The crypto industry is well aware of the financial power of 401k plans and their potential impact on the capitalization of crypto markets.
The potential inclusion of crypto investments in 401k plans can be comparable to the launch of spot crypto ETFs. As soon as speculative players realize that rumors about 401k plans have merit, they will rush to increase their exposure to crypto assets, pushing their prices towards new highs.