US Treasury Secretary Yellen advises against Bitcoin for retirement savings

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U.S. Trea­sury Sec­re­tary Yellen said Bit­coin, as a retire­ment sav­ings vehi­cle, would be a “very risky” move, Bloomberg News report­ed.

She added that it would be fit­ting for Con­gress to “address the dan­ger,” sug­gest­ing leg­isla­tive changes to retire­ment vehi­cles, such as 401(k)s, could be on the cards to exclude dig­i­tal assets.

Fidelity enables Bitcoin as 401(k) investment option

The largest provider of retire­ment plans in the U.S., Fideli­ty Invest­ments, shocked the invest­ment world in April by announc­ing plans to offer its 401(k) cus­tomers the option to invest in Bitcoin.

“Rough­ly 23,000 com­pa­nies use Fideli­ty to admin­is­ter their retire­ment plans, and Fideli­ty cur­rent­ly has more than $11 tril­lion in assets under administration.”

The firm will allow retire­ment savers to assign up to 20% of their account bal­ance to the lead­ing cryp­tocur­ren­cy, with indi­vid­ual fidu­cia­ries able to set their own lim­its on employ­ee con­tri­bu­tions and allocations.

Fideli­ty is cur­rent­ly build­ing out its dig­i­tal assets plat­form, mean­ing the option won’t be avail­able until lat­er this year.

Cryp­tocur­ren­cy advo­cates see this as anoth­er step towards the legit­i­ma­cy of dig­i­tal assets. But oth­ers have blast­ed the move as a ter­ri­ble idea.

Senior Research Ana­lyst at Morn­ingstar, Made­line Hume, said the dif­fer­ence between stocks and bonds in a retire­ment account ver­sus BTC is that div­i­dends and inter­est pay­ments back the for­mer. Bit­coin pric­ing is large­ly spec­u­la­tion-dri­ven, which “makes it a bad fit” for retire­ment savings.

“The absence of fun­da­men­tals and val­u­a­tions makes it a bad fit for a 401(k) plan.”

BTC outperformed all other assets over the past decade

Despite the hos­tile rhetoric, pro­po­nents would argue that as the best per­form­ing asset of the pre­vi­ous ten years, not includ­ing Bit­coin in a retire­ment sav­ings vehi­cle would be over­ly cautious.

In 2021, the founder of Com­pound Cap­i­tal Advi­sors, Char­lie Bilel­lo, tweet­ed an analy­sis of asset class­es show­ing total per­cent­age returns from 2011 to 2021.

It showed pos­i­tive year­ly returns for Bit­coin in all but the years 2014 and 2018. Over the ten years, BTC’s cumu­la­tive return came out at 20,037,142%, around 37,000 times more than the next best-per­form­ing asset class- the Nas­daq 100.

Analysis of asset classes showing Bitcoin as best performing asset
Source: @charliebilello on Twitter.com

A sig­nif­i­cant pro­por­tion of these gains came about ear­ly in BTC’s life cycle when it was priced rel­a­tive­ly cheap­ly. Mean­ing that sim­i­lar per­cent­age moves are unlike­ly to hap­pen again over the next ten years.

Nonethe­less, with an annu­al­ized aver­age of +230% gains, it is dif­fi­cult to ignore Bit­coin as a vehi­cle for cap­i­tal growth.



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