Trump Approves Cryptocurrency for 401(k)s, Rolling Back Biden’s Security Measures

Key Points

• The Trump administration has relaxed restrictions on 401(k) retirement plans investing in cryptocurrencies.
• Analysts predict this could lead to a significant increase in demand for Bitcoin.

The Trump administration has recently rescinded a directive from the Biden era that cautioned 401(k) retirement plans against investing in Bitcoin and other digital currencies. This announcement was made by the Department of Labor on May 28th.

While this change does not necessarily signify an endorsement of cryptocurrencies, it does reflect a more neutral stance on their inclusion in 401(k) investment plans.

Potential Surge in Bitcoin Demand

Many analysts and asset managers believe this regulatory shift could trigger a substantial increase in demand for Bitcoin. Angre Dragosch, the head of research at Bitwise Europe, suggested that this is a significant development given the enormous amount of money managed in 401(k) plans in the US.

Ryan Rasmussen, another analyst at Bitwise, echoed this sentiment, noting that even a 1% demand from 401(k) funds could significantly surpass inflows from ETFs.

In the first quarter of 2024, Bitcoin’s value doubled from $36K to $72K following the debut of U.S. spot ETFs. The digital asset has since rallied almost 180% to over $110K, although it has temporarily fallen back to $107K.

Bitcoin Could Reach $120K

On-chain data analysis firm Glassnode has suggested that Bitcoin could potentially reach $120K. This prediction is based on the MVRV extreme deviation pricing bands.

It’s worth noting that the profitability of short-term Bitcoin holders has increased by 16%, according to the SOPR indicator. However, Axel Adler from CryptoQuant has observed that selling pressure is relatively subdued, suggesting that Bitcoin could continue to climb.

In the short term, the closest price magnet is the liquidity pool between $104.4K and $106.2K. If Bitcoin falls to $103K, over $5B of leveraged long positions could be at risk of liquidation. Conversely, if Bitcoin rises to $113K, around $10B of leveraged short positions could be wiped out.