Dollars and Hops

041 | Invest In Crypto Inside Your 401k? | "Should I Take Out A HELOC To Invest?" | Coffee Budget Hack

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Ashley wrote a question for the pod and I decided it was important enough to make a whole show out of this topic.  Question is: My employer is going to be allowing us to invest in digital assets including Bitcoin within my 401k coming soon.  Is it a good idea to be investing in bitcoin within my 401k?

  • Earlier this year-  in May - Fidelity announced that they would be allowing bitcoin as an investment option in employer sponsored 401k’s.
  • About 23,000 employers currently use Fidelity for their 401k administrator - so it’s likely this will impact you soon if it hasn’t already by the time you have heard this.
  • Fidelity will allow retirement investors to allocate up to a maximum of 20% of their investments into Bitcoin.
  • But before you get too excited, understand that Bitcoin won’t be showing up on your 401(k) plan’s investment menu immediately. Fidelity is still building its digital asset platform, which should become available in plans later this year.
  • Employers will have to approve crypto investments inside the plans they provide to their workforce. And because of their fiduciary duty—placing the needs of plan participants above all else—companies may be reluctant to provide immediate access. Many will likely take a wait-and-see attitude before making a move to offer crypto as part of their retirement plans.

    • Pro’s:

    • Digital assets - including bitcoin have done well over the last 10 years.  You may have a little bit of FOMO with these assets and they have done well.  This would give you exposure to an asset class that could possibly out-perform stocks in the short or long term.

      • Con’s:

      • These digital assets have no real long-term track record.
      • Many of these digital assets could go to zero
        • BTC is down 57% this year
        • ETH down 70% this year
        • The system itself has not been tested - What happens if crypto platforms go bankrupt?
          • Back in 2014 - Mt Gox - which was the coinbase of today went bankrupt. It caused the price of bitcoin to plummet.
          • Terra Luna went to 0 and was supposed to be a “stable coin”
          • Coin Flex - major exchange halted withdrawals due to “extreme volatility”
          • Celsius - freezed customer accounts - Under investigation currently.
          • Crypto lender babel finance freezes all withdrawals from customers
          • Liquidity could be an issue at a point in the future
          • In a May Quarterly filing - Coinbase stated that in the event of their bankruptcy -  it’s entirely possible that the digital assets the customers own may not actually belong to its customers.
          • Crypto markets are not FDIC insured
          • Digital Assets that have no utility are only worth what someone else will pay for them.


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