AlexSava/E+ via Getty Images
Bitcoin (BTC-USD) slumped to a six-week low of $38,423 on Monday morning as investors pulled out of risk assets, but rebounded off its bottom following an intraday rally spearheaded by Elon Musk’s deal for Twitter. More positive news saw the popular crypto rally 5.6% to $40,641 on Tuesday as Fidelity Investments announced plans to allow investors to put Bitcoin (BTC-USD) in their 401(k)s. It’s a big move for the industry, which to date has effectively limited crypto investing for company-sponsored retirement accounts.
Quote: “We have seen growing and organic interest from clients,” especially those with younger employees, said Dave Gray, head of workplace retirement offerings and platforms at Fidelity. “We fully expect that cryptocurrency is going to shape the way future generations think about investing for the near term and long term.”
Later this year, employees at companies that sign up for the new offering will be able to transfer up to 20% of their account balances into a digital assets account that holds Bitcoin (BTC-USD), though employers can impose lower caps. About 5% or less of the Bitcoin (BTC-USD) account will be held in a money market fund to provide liquidity for daily transactions, while fees on the account will range from 0.75% and 0.9%. Although the investments will be limited to Bitcoin (BTC-USD) initially, other digital assets are expected to be made available in the future.
Not so fast: Last month, the U.S. Labor Department, which regulates 401(k)s, outlined “serious concerns about plans’ decisions to expose participants to direct investments in cryptocurrencies or related products, such as NFTs, coins, and crypto assets.” The guidance went on to flag valuation troubles, volatile prices, obstacles to making informed decisions and the evolving regulatory landscape. “Cryptocurrency has gained mainstream popularity and notoriety, but there is still great uncertainty about how the market will develop, and little agreement on investing fundamentals relating to cryptocurrency.”
On Monday, European Central Bank Executive Board Member Fabio Panetta likened crypto to a “Ponzi scheme” and called for a new global framework.