Bitcoin’s 50% plunge from its October peak not only wiped $2 trillion off its market value, but also reignited a heated debate over the calculation of trusts in the U.S. retirement system.
As investors scramble to analyze the drivers of the latest crash, industry observers are asking whether volatile digital assets have any business relationship with $12.5 trillion worth of 401(k) assets. Markets are designed to be stable.
“If investors want to speculate in cryptocurrencies, we welcome them to do so themselves. 401ks exist to help people save for a secure retirement, not gamble on speculative assets that have no intrinsic value,” said Lee Reiners, a lecturer at Duke University’s Center for Financial Economics and co-host of the Coffee & Crypto podcast.
U.S. President Donald Trump issued an executive order in August allowing 401(k) and other defined contribution retirement plans to access alternative assets, including digital assets. Even U.S. Securities and Exchange Commission (SEC) Chairman Paul Atkins said last week that the time was “ripe” to open the retirement market to cryptocurrencies, just ahead of the latest brutal cryptocurrency sell-off.
But the recent debacle in the cryptocurrency space may cause retirement fund managers to abandon plans to add cryptocurrencies to 401(k) plans.
Reiners said several large crypto companies, such as Coinbase (COIN), have been included in major stock indexes, meaning many 401(k) plans already have indirect exposure to cryptocurrencies, which should be enough.
“Unless Congress changes the law, plan sponsors are unlikely to include cryptocurrencies or ETFs as plan options because they don’t want to be sued by their employees. For any employer who is considering doing so, I believe recent events should make them reconsider,” Reiners said.
The problem with putting people’s life savings into cryptocurrencies is that the industry is relatively young and extremely unstable, while pension funds are there for steady growth.
Buy and hold can work for assets like the S&P 500, which see large swings primarily during black swan events, such as the 2008 financial crisis or the uncertainty of COVID-19. However, given the size of traditional markets, governments often step in to stop the bleeding, and many regulatory frameworks exist to protect people’s investments.
But for cryptocurrencies, much of the activity is simply speculation, which means prices can experience extreme swings over the weekend or during the week, which can quickly destroy billions of dollars in value without regulatory oversight of market movements. That makes it even more nerve-wracking for investors to put their life savings into it.
No “quick departure”
From an objective perspective, many companies may have been caught off guard by the sudden collapse of Bitcoin and cryptocurrencies over the past few days.
In fact, the recent brutal sell-off was so violent and sudden that BlockTrust IRA, the AI-driven retirement platform that added $70 million in IRA funds in the past 12 months, was left bleeding.
“Sometimes we say, ‘You know what, we should exit,’ and sometimes we don’t. Last week, we didn’t exit as quickly because a lot of the fundamental data we were looking at was still very strong,” Chief Technology Officer Maximilian Pace said in an interview with CoinDesk.
However, regarding the sudden sell-off, Pace pointed to the company’s “broad analytical awareness,” which effectively operates over longer periods of time than short-term trading. The strategy helps it outperform the market in 2025, which the company added “will not necessarily be shaken by volatility.” The artificial intelligence trading firm’s Animus fund outperformed Bitcoin throughout 2025, rising 27% from January to December 2025, while Bitcoin’s buy-and-hold strategy fell 6% to 13% during the same period, the company said in a press release.
In Pace’s view, looking ahead and considering cryptocurrency investments over a 5- to 10-year time horizon is the right way to think about a 401(k) plan.
“You’re better off thinking like a venture capitalist rather than a day trader,” Pace said. “There are ways to reduce the risk of an investment, both from a timing perspective and from a strategic perspective, making it more attractive or more acceptable for something like a 401(k) plan. But like anything, there’s risk.”
The future of pensions
Perhaps the scope needs to be narrowed further and think about actual blockchain technology for retirement investment management, rather than just putting money into tokens.
That’s exactly what Robert Crossley, head of global industry and digital consulting services at Franklin Templeton, thinks. He said the retirement industry is siled, slow-moving and over-regulated, and that on-chain wallets that hold tokenized assets could be revolutionary.
By doing this, Crossley said, an individual’s digital wealth will be more consistent with the rest of their life.
“Whether you’re a saver, an investor or a consumer, you go through all these different financial activities, and you have very different services from different providers in your life right now,” Crossley said in an interview.
If regulations work and do not prohibit innovation, then blockchain technology may well be able to eliminate this fragmentation of intermediaries. He said the industry could see a proliferation of wallets “unleashing the possibility of programmable assets and securities, and the ability to view all assets in one place and control them directly, rather than through an intermediary.”
“When something is tokenized, it becomes software. That software can be an asset, but it can also be a benefit, it can be a liability. It can be your entire 401(k). It can be your entire DC. [defined contribution] plan,” Crossley said.
