President Donald Trump’s recent actions have brought considerable optimism to Bitcoin investors. Following his election victory, Trump has taken several steps that have positively impacted the world’s most valuable cryptocurrency. Since Trump’s win, Bitcoin has surged by almost 60% as of late May and has surpassed the $111,000 mark on several occasions.
The administration has been notably supportive of cryptocurrency, with pro-crypto advisors now in key positions. Trump has appointed the former head of a financial and crypto consulting firm to lead the Securities and Exchange Commission. He also announced the creation of a U.S. Strategic Bitcoin Reserve to manage the Bitcoin currently held by the government and potentially acquire more.
Earlier restrictions imposed by the Labor Department under former President Joe Biden’s administration have been reconsidered. The previous guidance cautioned U.S. companies against allowing employees to invest in cryptocurrencies via their 401(k) savings accounts due to extreme price volatility and potential risks, including speculative trading and theft. However, the Trump administration has rescinded this guidance, giving employers the option to offer crypto investments in 401(k) accounts.
The Labor Department stated it is “neither endorsing nor disapproving of” these investments, but the move is seen as a green light for greater integration of cryptocurrencies into retirement accounts.
Trump boosts crypto adoption in 401(k)s
The decision has sparked discussions among financial experts.
During 2024, the U.S. Government Accountability Office reported low levels of actual investment in crypto despite some 401(k) plans offering the option. With the updated guidance, many expect this scenario to change, providing a boost for Bitcoin and the broader cryptocurrency sector. Experts believe that broader adoption by mainstream financial institutions could drive crypto prices higher.
Retirement savings in 401(k) plans totaled over $8.9 trillion by the end of 2024, so even a gradual increase in crypto allocations could significantly impact the market. While adding crypto to a 401(k) portfolio is a matter of personal preference, financial analysts have conducted studies on its potential benefits. One report concluded that, in a traditional portfolio comprising 60% stocks and 40% bonds, a 1-2% allocation to Bitcoin equates to a similar risk profile as several high-performing stocks combined, termed as the “Magnificent Seven.”
Bitcoin, often likened to digital gold, is viewed by many as a hedge against inflation and a safe-haven asset as fiscal concerns intensify.
Its finite supply of 21 million tokens and demonstrated resilience make it an attractive option for diversification within investment portfolios. Financial experts generally recommend a modest allocation to Bitcoin in 401(k) accounts, citing the cryptocurrency’s potential for diversification and risk management. As the market evolves and federal guidance becomes clearer, Bitcoin’s role in retirement portfolios is likely to continue growing, marking a significant shift in how investors approach both cryptocurrencies and traditional investment strategies.
