By Kelvin Lee , Alonso Munoz
Back in April, Fidelity announced a digital assets account that would allow its 401(k) participants to purchase Bitcoin (BTC) directly by the end of the year. We ask ourselves: is this a good idea for your 401(k)? The short answer is, “probably not”.
The fundamental goal of a 401(k) is investing for retirement. It’s part of your life savings and therefore, an appropriate risk strategy should be applied to the assets inside. When you purchase traditional investments, i.e., stocks and bonds, you’re purchasing a company’s debt and equity. The firms’ dividends, growth, cash flows and interest payments back up the investment and are factored into the purchase cost. The problem with Bitcoin is that the price is purely demand driven. Fundamentals and valuations don’t apply as there isn’t an underlying asset that currently supports the currency. Future price movements are then difficult to estimate and extremely volatile. Even stable coins, which were developed as a haven from the typical volatility of crypto assets, collapsed back in May. For more inforamtion Visit our blog here - Crypto In Your 401(k)? A Virtual Toss Up.