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Crypto as an Alternative to 401(k)? Smells Like Teen Spirit

Published Jun 10, 2021 08:00AM ET
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  • The institutional investment branch of Coinbase will facilitate 401k investment alternatives.
  • 50 cryptocurrency assets will be available for investment, helping to broaden altcoin investment opportunities.
  • Retirement plan crypto investments have grown in popularity since 2020.

Increased exposure of institutional investors to cryptocurrencies is a narrative growing in importance as it is vital to the process of mass adoption. Volatility is a determinant of the lack of market liquidity, which could be ameliorated by the entry of significant investment funds. ForUsAll, a San-Francisco-based retirement plan provider, announced that they would be increasing exposure to cryptocurrency assets as part of their alternative 401(k) plan.

Cryptocurrency Assets As Alternative Investments

401(k) plans are workplace benefit plans that provide millions of Americans with the opportunity to save part of their salary through automatic enrollment. With cryptocurrencies just entering the spotlight of mainstream financial P.A, only a small portion of retirement funds target crypto assets.

ForUsAll announced a partnership with Coinbase International to offer crypto as potential alternative investments, denoting them to be an “exotic investment.” The press release stated, “By introducing the Alt 401(k), we are democratizing access to what drives wealth for the wealthy.”

Access to cryptocurrencies represents a paradigm shift for institutional investors who, according to a study, allocate 36% of their funds into cryptocurrencies and 80% of their funds into alternatives. The head of Institutional Coverage at Coinbase highlighted that additional investment options are the next step needed for crypto to reach a wider audience.

On the Flipside

  • In November 2020, Daim announced they would allow allocations of 10% towards Bitcoin investments as part of the 401(k) plan.
  • Cryptocurrency is still a volatile and risky investment, regardless of investment plan.
  • Crypto is only one type of alternative investment employers can access.
  • Users will pay a fee of 0.5% for each purchase, and a 1% annual fee.

Safe Passage For Crypto

Gen Z and Millenials account for the majority of cryptocurrency investors. 401(k) will help to give cryptocurrency exposure to an additional segment of Americans who’ve been left on the wayside due not having access to such innovations. David Ramirez highlighted that it is paramount that ForUsAll offers “access along with education, guidance, and guardrails” in order to facilitate the process “in a prudent fashion.”

ForUsAll, recommends investing in more enduring opportunities, such as stocks, bonds, or real estate, with only 5% being allocated to altcoins. This small allocation margin for crypto is not “a regulatory measure” but rather a recommendation for retirement investors.

The company will provide tools and resources for employees to get acquainted with crypto. The company will monitor their customers’ portfolios and alert them when they exceed 5%, helping them to “rebalance into more traditional mutual funds.”

New investment avenues will maintain the balance between younger and older investors. Through ForUsAll, employees will have access to the digital tokens so widely used by Millennials. DeFi protocols such as Algoland and Uniswap will be as yet unfamiliar additions to their 401(k) portfolio.

Crypto Investment Made Easy

Coinbase’s IPO partially facilitated Bitcoin and crypto’s entry into the financial mainstream. Coinbase International will act to streamline the back-end richness of the investment fund, securing and managing their assets.

The willingness of start-up companies to jump on the crypto bandwagon could be a catalyst for more established and noteworthy 401(k) entities to integrate crypto assets as an “alt-investment” into the existing options of their users.

Trillions of dollars have already been “forgotten” in 401(k) plans, illustrating the sheer volume that could pour into cryptocurrencies, and while increasing the capital of crypto might not directly equal an increase in prices, crypto could benefit from expanding towards a new investment demographic.


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Crypto as an Alternative to 401(k)? Smells Like Teen Spirit

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