KEY POINTS
An executive order issued by President Donald Trump on August 7 aims to make it easier for millions of Americans to include alternative assets such as cryptocurrency, private equity, and real estate in their 401(k) retirement plans. The move, which affects some 80 million savers, is positioned as a way to bolster retirement accounts by providing access to asset classes that have historically offered higher returns than traditional stocks and bonds.
The order targets the estimated $10 trillion held in American 401(k) accounts, which are tax-deferred savings plans where employees can invest a portion of their pre-tax wages, often with a contribution match from their employer. Proponents argue that allowing higher-growth assets could help savers who face uncertain retirement prospects and find their current savings insufficient to maintain their lifestyles.
A Performance-Based Argument
The inclusion of bitcoin and other alternatives is primarily justified by their historical performance. Over the past three years, for instance, bitcoin has delivered returns of approximately 215%, significantly outpacing the S&P 500’s 54% gain over the same period. Even the high-performing “Magnificent Seven” tech stocks saw returns of only about 150%.
This trend is not limited to cryptocurrency. Private equity has also consistently posted returns that are several percentage points higher than public markets, making it a highly sought-after asset class for institutional and pension fund managers seeking to maximize long-term growth.
Indirect Exposure Becomes Direct
While the executive order has drawn criticism over concerns of off-loading risk to everyday investors and questions about the former president’s motives, supporters note that retirement funds are already gaining indirect exposure to bitcoin. Major companies included in the S&P 500 index, a staple of many 401(k) portfolios, have integrated bitcoin into their corporate treasuries.
For example, Tesla has held bitcoin since 2021, and the payment company Block is the 12th-largest corporate holder of the asset. More recently, the cryptocurrency exchange Coinbase joined the S&P 500 in May, and the company has publicly committed to increasing its bitcoin holdings over time.
The MicroStrategy Factor
The most prominent example of this trend is MicroStrategy, the largest corporate holder of bitcoin, led by Executive Chairman Michael Saylor. The company’s core business strategy now revolves around raising capital to acquire more bitcoin. With its market capitalization growing, MicroStrategy is widely expected to join the S&P 500, which would mean that any passive investment in an S&P 500 index fund would automatically include exposure to its bitcoin-centric strategy.
In this context, the executive order can be viewed as a formal acknowledgment of an existing market reality. As bitcoin becomes further woven into the fabric of the financial system, this directive simply provides a more direct and transparent path for retirement savers to invest in the asset, effectively stripping out the corporate middlemen.
