Fidelity Investments has launched what it calls the Fidelity workplace Digital Assets Account (DAA), which will allow people to invest a portion of their 401(k) retirement savings in Bitcoin.
MicroStrategy immediately announced that it will be the first employer to offer the plan later this year. It will be available broadly to most employers by the middle of this year.
Under the plan, employers will be able to offer their employees access to Bitcoin through an investment option in their core 401(k) retirement plans on Fidelity’s platforms. Fidelity began exploring digital assets in 2014 and launched its first commercial offering four years later.
Adding Bitcoin to retirement accounts is another step toward embracing digital assets. Despite the digital currency’s recent volatility, many financial experts see it as a natural step in retirement planning.
"We believe that many investors are already using 'self-directed brokerage' features of their 401k plans to add Bitcoin and other crypto exposures through inefficient vehicles such as mining-focused ETFs and grantor trusts holding coins or futures contracts,” Dan Hoover, director at Castle Funds, told ConsumerAffairs. “The addition of an efficient option such as Fidelity’s is an important step in opening efficient access to Bitcoin and crypto to these investors."
Investments could reduce Bitcoin volatility
Hoover says his company’s research suggests that small allocations to Bitcoin can greatly reduce overall portfolio volatility when added to traditional stock-and-bond portfolios.
Chris Kline, COO and co-founder of Bitcoin IRA, believes Fidelity is ushering in what he calls “one of the greatest adoption moves for digital assets that we’ve seen in its short history.” He says the action could have a major impact on the future of cryptocurrency.
“While this may not be having a direct effect on the price of Bitcoin and other crypto’s today, it can certainly act as the catalyst for a rally later this year,” Kline told us. “In addition to this exciting news, I think we’ll see Elon Musk make crypto more accessible across Twitter, which will also help with the widespread adoption of crypto.”
Digital assets gain value
Bitcoin moved higher on the news, rising 1.42% in Wednesday’s trading. Kline said “trillions of dollars” could flow into crypto markets as a result of Fidelity’s action, especially if it captures the attention of younger workers.
“Ultimately, part of the retirement crisis we have in this country is due to lack of participation in 401(k)’s,” he said. “This move could be a way to get gen z and millennial workers engaged through their employer-sponsored plans.”
Fidelity said it did its homework before adding the investment options. The company cites research showing that 30% of U.S. institutional investors surveyed would prefer to buy an investment product containing digital assets.