Fidelity adds Bitcoin to 401(k) options. Should you be thinking about it?

Fidelity announces plans to include Bitcoin

As an option in some retirement accounts later this year. Does it make sense to include cryptocurrency as part of your retirement plans?

20% limit

Ultimately, employers will have the power to decide whether to include Bitcoin and will also have to consider legal considerations as sponsors of the 401(k) plan. Fidelity will make Bitcoin an option but not all employers may choose to offer it to their employees. For those who do, implementation may take some time.

Also, Fidelity intends to cap the ownership of Bitcoin at 20% of the wallet, but employers may set a minimum. It will be prepared for long-term investment, not for day trading.

Bitcoin as an asset

Bitcoin appears to have an increasing role in asset allocation. It might be more like gold. Like gold, Bitcoin has value only because people choose it, and like gold, Bitcoin is not a productive asset. It does not make profits and does not pay dividends. Most importantly, bitcoin is scarce, like gold. It is difficult to extract more gold, and bitcoin mining will be limited to 21 million bitcoins. Currently, about 19 million bitcoins have been mined.

This scarcity is the source of Bitcoin’s value, and that can come in handy during times of inflation and poor economic performance, as now with some seeing a recession on the horizon and inflation running in high single digits. Assets like bitcoin and gold can hold their value during times when stocks and bonds are underperforming, helping to balance the portfolio in all states of the economy.

Unproductive assets

However, over time, keeping non-productive assets in isolation has not been a great investment strategy. Famous investor Warren Buffett likes to make the point that if you compare a cube of gold and a farm with the same initial value, over time the farm will produce things and have the potential to reinvest profits and expand. On the other hand, with a cube of gold, you will always have a cube of gold. It can never grow.

Despite Bitcoin’s massive volatility as people become familiar with the technology, it may eventually become more like gold in its return profile. It can be a useful part of the portfolio, and ironically, it eventually comes to provide stability over the coming decades. However, if history is any guide, stocks and bonds may be the assets that offer the potential for greater returns in the long run.


As with any long-term investment, fees are also worth noting. The costs of owning stocks and bonds today, especially in well-managed 401(k) plans, tend toward zero.

On the other hand, Bitcoin is still somewhat expensive to trade and save. Over time, this may reduce the return of bitcoin simply because the cost of trading and holding is higher. However, as with stocks and bonds, these Bitcoin costs may decrease over time as well.

More options for any retirement plan would likely be better, and including assets like Bitcoin could eventually help diversify your retirement portfolio. However, as with gold, smaller allocations to Bitcoin may be appropriate, as stocks and bonds have historically generated the most attractive returns over time.

Ironically, the fact that Bitcoin is being adopted into standard financial operations such as exchange-traded funds and 401(k)s may begin to mean that some of its best days of return are overdue as it becomes more widely owned.

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