U.S. President Donald Trump expected signing of an executive order allowing Americans to add Bitcoin and Ethereum to their 401(k) retirement accounts on Thursday sent crypto markets higher, and analysts believe the news will likely continue to bolster the asset.
The order will lead to billions of dollars in investments in digital assets, Varys Capital Head of venture Tom Dunleavy told Decrypt.
“Every two weeks when most Americans receive their paycheck from their employer, a portion of that-usually between 1% and 10% – is allocated to their 401(k),” Dunleavy said. “Usually that’s something like 60% stocks, 40% bonds. If suddenly that becomes 5% crypto in that allocation, you can see billions coming into the asset class over the next few years.”
According to Dunleavy, the consistent flows will also help create a floor, or a more stable baseline price.
The order would allow individuals to hold alternative investments like private equity, real estate, and cryptocurrency, according to a Bloomberg report. Bitcoin jumped on the news to trade at $116,305, near a 1% gain over the past 24 hours, while Ethereum was changing hands at $3,816, up nearly 4% over the same period.
“The near-term impact of Trump’s 401(k) executive order is that it sends another message to investors that crypto’s regulatory awakening is here to stay.” Bitwise Head of Research Ryan Rasmussen told Decrypt. “That’s clearly pushing the market higher.”
A 401(k) is a popular retirement account and investment vehicle used by Americans that accounts for trillions of dollars in assets with individuals often contributing on a regular basis via their employers or paychecks.
“If crypto captures 1% of 401(k) assets, that’s $125 billion of new capital entering the space, with a steady flow thereafter. A 3% capture would be $375 billion, and a 5% capture would be $625 billion. That’s a lot of long-term, sustained buying pressure,” Rasmussen said about the opportunity present for crypto.
“In the medium- and long-term, the EO and response from 401(k) plan providers will channel tens (and possibly hundreds) of billions in capital into crypto assets,” he said.
