After a choppy start to the week, bitcoin and other major cryptocurrencies plateaued.
Today the bitcoin price is up a couple of basis points. Ether
ETH
BNB
ADA
XRP
Meanwhile, crypto king bitcoin’s passed what many call a “historic milestone”. For the first time, investors will be able to invest a portion of their 401(k) funds in the crypto. This comes after Fidelity, the world’s third-largest asset manager, announced that it will offer bitcoin in its retirement accounts.
On Tuesday, Fidelity said that the crypto is coming online in their 401(k)s by mid-2022. And it will be available to over 23,000 employers who hold their retirement accounts with Fidelity.
[Ed note: Investing in crypto is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
This makes Fidelity the first asset manager to offer crypto for retirement savings – the latest indicator that crypto is going mainstream. Fidelity is the largest 401(k) provider managing over $4 trillion in assets—one-fifth of which will be available for crypto.
That means bitcoin may be in for $800 billion buying frenzy this year.
Bitcoin
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Zooming out
Not long ago, investors dismissed bitcoin as the biggest Ponzi scheme in history. Today many fund managers embrace the crypto as an asset class, the likes of Tesla
TSLA
Still, bitcoin has yet to answer what kind of investment is is. Is it a tech-oriented, speculative investment? Or is it a digital safe haven against fiat depreciation, as in gold 2.0?
Traditionally, gold has been viewed as a monetary safe haven. Now, in the midst of growing interest in digital assets, investors are wondering if bitcoin could become its 21st-century successor.
As I wrote yesterday, all the evidence shows that it’s not the case yet. Bitcoin
BTC
“Amid greater adoption, the correlation of crypto assets with traditional holdings like stocks has increased significantly, which limits their perceived risk diversification benefits and raises the risk of contagion across financial markets,” wrote the IMF in its January report.
Some analysts, however, think that bitcoin’s volatility will peter out in the face of mainstream adoption. William Clemente, lead analyst at mining firm Blockware, thinks bitcoin will take on a life of its own and “decorrelate” from tech stocks as soon as next year.
“[I’m] going to go on record and say that I think we see a decorrelation between bitcoin and stocks in the next 12 months…”
Will bitcoin become gold 2.0 when Fidelity and other asset managers put crypto on the 401(k) menu? Time will tell.
Looking ahead
Crypto will face a lot of headwinds this year, including the global regulatory milieu and increasingly hawkish central banks. So it’s hard to tell the exact impact 401(k)s will have on bitcoin’s price.
But this seismic Fidelity move demonstrates how far crypto has come over the past few years. It is likely to become a colossal boost to the acceptance of digital currencies as an alternative asset class for investors.
This suggests that, even though there may be a dip in the short term, bitcoin is becoming an increasingly worthy alternative asset for diversification and long-term investing.
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