Amid the bear market, the financial services firm Fidelity Investments announced it is giving companies the ability to allow employees to invest up to 20% of their retirement savings in Bitcoin (BTC). However, financial analysts have raised concerns about such a development.
Recently, BTC hasn’t shown much green on its price chart. Its drop in value has attracted a lot of attention, having fallen more than 50% since its all-time high in November 2021, and some are wondering if the sell-off will affect the broader crypto-economy.
BTC price has gently stabilized around $28,000-$30,000 for the past few days. This could be the best time to buy the dip for its die-hard, risk-tolerant supporters like El Salvador President Nayib Bukele. Amidst this, Fidelity Investments announced now it allows corporate employees to invest up to 20% of their 401(k)s in BTC, meaning anyone interested in acquiring Bitcoin for their 401(k) should first check if their employer offers it.
Fidelity Investments Dave Gray, Head of Workplace Retirement Offerings and Platforms, explained:
There is growing interest from (retirement) plan sponsors for vehicles that enable them to provide their employees access to digital assets in defined contribution plans, and in turn from individuals with an appetite to incorporate cryptocurrencies into their long-term investment strategies.
Gray also noted that any company with employees interested in digital currencies like BTC as part of the long-term financial system revolution should consider the product. However, he cautioned against using it as a short-term bet on crypto returns.
However, not everyone welcomed this development. Madeline Hume, a senior research analyst at Morningstar, strongly opposed investing any portion of a 401(k) in cryptocurrency even before BTC’s significant drop in value. On April 27, she wrote in a note:
While Morningstar is not against cryptocurrency—and full disclosure, I own some bitcoin—Fidelity’s strategy for capitalizing on the crypto momentum is misplaced. At this stage, mixing bitcoin and 401(k) plans is a terrible idea.
Additionally, on Friday, Rep. Byron Donalds proposed a bill to the United States House of Representatives that would allow Americans to add BTC to their 401(k) retirement plans. The bill is being pushed by Senator Tommy Tuberville of Alabama and supported by Republicans.