When it comes to high-risk investments, Bitcoin (BTC) has long been at the top of the list. But with Fidelity’s recent announcement that it would offer Bitcoin in its retirement accounts, the flagship crypto may have just crossed a major milestone.
This is because investors will now be able to entrust a part of their hard-earned 401(k) funds to the volatile and dynamic world of crypto trading. With one of the biggest asset managers on earth behind it, Bitcoin is sure to see a surge in popularity among retirement savers.
On Tuesday Fidelity said that it will allow individuals to allocate part of their retirement savings in Bitcoin through a Digital Assets Account (DAA). The world’s third-largest asset manager also said that the new offering, which will be available by the middle of this year, includes more than 23,000 employers who hold their retirement accounts with Fidelity.
This move, which makes Fidelity Investments Inc the first asset manager to offer crypto for retirement savings, could trigger a massive influx of investment into the cryptocurrency market, as Fidelity manages over $4 trillion in assets— one-fifth of which could potentially be invested in crypto.
That means BTC could see a buying frenzy totaling $800 billion this year.
With Fidelity now entering the fray, it seems that the mainstream adoption of cryptocurrency is finally underway.
Interestingly, it wasn’t that long ago when Bitcoin was described as “probably rat poison squared,” or dismissed as a massive, long-running Ponzi scheme. However, the digital currency has proved these claims wrong and has become a force to be reckoned with in the financial world. Bitcoin is now being accepted by major businesses and institutions, and its popularity is only growing.
Still, Bitcoin remains a hot topic in the world of finance. Many people debate whether the crypto asset represents an alternative form of money, one that is immune to inflation or destabilizing central bank policies, or a stable investment vehicle backed by market demand and intrinsic value.
While there is no clear answer as to what kind of investment Bitcoin really is, investors are wondering if Bitcoin could become gold 2.0. Obviously, it is a nice analogy but unfortunately, we are not there yet given the digital asset’s speculative nature.
The cryptocurrency’s roller coaster ride has taken it from about $48,000 on March 28, to below $39,000 this week. The sell-off has since stabilized somewhat, but the digital currency is still down more than 18% on a month-over-month basis. At last check, the $736 billion market cap cypto asset was changing hands at $38.610, down 3.34% in the last 24 hours.
Like other highflying assets such as stocks and oil, Bitcoin is prone to sharp price swings. And when the market is volatile, investors tend to flock to safe-haven assets such as gold.
But lately, Bitcoin has been behaving more like a risk asset than a safe haven. For one thing, its correlation with the Nasdaq 100 Index (NDX) has been on the rise in recent months. And that makes sense given that both assets are heavily influenced by technology trends, news, and investor sentiment.
Some analysts, however, see Bitcoin’s volatility diminishing in the face of mainstream adoption. William Clemente, lead insights analyst at mining firm Blockware, gave the correlation a year to play out.
“Going to go on the record and say that I think we see a decorrelation between Bitcoin and stocks in the next 12 months once this transfer of supply is complete,” he stated, adding that “[i]f/when this occurs, it would be quite reflexive and powerful.”
Will BTC become gold’s 21st-century successor when just like Fidelity, other asset managers also put crypto on the 401(k) menu?
While it is still early days, and there are many hurdles to overcome before Bitcoin can become a viable asset class, one thing is cetain, BTC, which has far more utility than the yellow metal, has what it takes to become the modern-day gold.