Bitcoin Will Be Available to Fidelity 401(k) Investors This Year

Fidelity has more than $2.7 trillion worth of assets under management and becomes the first major retirement investment firm to offer a cryptocurrency option to everyday investors.

Key points

• The Wall Street Journal reported today that Fidelity Investments plans to make Bitcoin available to its 20 million retirement savers who have 401(k) accounts under management. Fidelity is the first major retirement investing firm to offer crypto to the masses.
• The article stated that the 23,000 employers that use Fidelity to manage retirement benefits will have the option to add Bitcoin -- or not – to the retirement portfolios available to employees later this year.
• Fidelity will allow individual portfolios to hold up to 20% in Bitcoin.

The Wall Street Journal first reported this morning that Boston-based Fidelity Investments intends to offer Bitcoin as an investment option to the 20 million individuals who have 401(k) savings accounts with the firm. According to the article, later this year, the 23,000 employer sponsors who use Fidelity to manage their retirement benefits will have the choice whether or not to add Bitcoin to the slate of investments that employees can then select for themselves.

Currently, the primary ways to secure Bitcoin are through a centralized cryptocurrency exchange, a decentralized exchange, or directly from another individual. This marks the first instance of a major, traditional retirement firm offering access to a crypto asset to everyday investors.

"There is a need for a diverse set of products and investment solutions for our investors. We fully expect that cryptocurrency is going to shape the way future generations think about investing for the near term and long term," said Dave Gray in the article, head of workplace retirement offerings and platforms at Fidelity.

The article noted that Gray said Fidelity would initially only support Bitcoin, with the expectation of expanding to other virtual currencies and digital assets in the future. While the Fidelity plan would reportedly allow individuals to hold up to 20% of their total portfolio value in Bitcoin, the actual percentage would be determined by the employer administrators.

Labor Department expressed concerns of crypto in 401(k)s

Ironically, the timing of Fidelity's announcement follows an anti-crypto-401(k) post last month on the U.S. Labor Department's blog site. The write-up, attributed to Ali Khawar, blasts the idea of including cryptocurrencies as an investment option for 401(k) savers.

"In recent months, some financial services firms have begun marketing investments in cryptocurrencies as potential investment options for participants in 401(k)s. At this early stage in the history of cryptocurrencies, however, the U.S. Department of Labor has serious concerns about plans' decisions to expose participants to direct investments in cryptocurrencies or related products, such as NFTs, coins, and crypto assets," wrote Khawar.

The blog also invoked President Biden's recent executive order that enlisted virtually all federal agencies under his remit to research the cryptocurrency space; self determine the role and regulatory solutions each agency can provide; and then report those findings publicly. The results are not expected until early fall.

In the meantime, Khawar stressed the need of establishing a regulatory framework first, before offering individual investors the crypto option within their own retirement portfolios, "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."

Bitcoin barely budged on the news

At the time of writing, Bitcoin was up 1.5% on the news at a trading price of $39,674 per token according to CoinMarketCap.com. The lack of price action in response to this news is a bit surprising as investors tend to "buy the rumor and sell the news." So in this instance Bitcoiners would load up on this Fidelity announcement now -- the "rumor" -- and then take profits when Fidelity actually rolls out its Bitcoin investment option -- the "news."

Regardless, offering millions of investors ready access to Bitcoin is a bullish signal for this project.

As a reminder, this is not financial advice and every investor should always do their own research and invest only what they can afford to lose. However, the fact that only 21 million Bitcoin will ever be available -- and only 2 million remain unminted -- suggests long-term upside for this scarce asset that's likely to increase in value as access and demand for it increase.