Crypto doesn’t belong in retirement accounts

I have long ago given up handicapping the price of bitcoin. I told people they were crazy to get in at $1,000. It doesn’t get much less prescient than that.

After falling by half to $29,000, bitcoin is now closer to $1,000 than it is to all-time highs around $70,000. It’s not the golden ticket it appeared to be during the pandemic investment mania, but it’s certainly made some people rich.

Of course, the same could be said of Russian roulette.

Bitcoin, and by extension its countless crypto copycats, is a great invention. Cryptocurrencies are self-verifying mechanisms — a string of numbers acting as their own, invisible watermark. They carry generally minimal finance charges, and they have no problem crossing borders. Bitcoin is a fascinating experiment in 21st-century money. But it’s still an experiment. Your employer wouldn’t give you a flying car as a company vehicle, and they should not be putting cryptocurrencies in your retirement account.

That’s why Fidelity Investments’ decision to make bitcoin an option in 401(k) accounts for 23,000 employers in April was more than just bad timing, though it did come right before a market crash. It was the worst product offering since clockmakers started painting faces with radium.


(Shortly after Marie Curie’s discovery of the volatile element, enterprising industrialists in New Jersey coated clock numerals with radium so that the timepieces glowed in the dark. At the time, this seemed like a whiz-bang new product line. Radioactivity was a new concept and people obviously didn’t fully understand its risks.)

Fidelity’s imprimatur gives the impression that bitcoin and cryptocurrencies have a proven safety record. That’s no more true than it was for radium in the 1910s. We are used to the funds in our 401(k) going up or down, but nobody would expect them to simply vaporize.

Yet that’s exactly what happened to a major cryptocurrency called TerraUSD recently. It’s difficult to write this with a straight face, but TerraUSD, unlike free-floating bitcoin, was supposed to be a “stablecoin.” The programmers who made TerraUSD claimed to have pegged its value to the dollar, from which it was not supposed to stray by more than a penny or two. In a feat of financial engineering comparable to Lehman Brothers’ mortgage-investment magic, they did so without buying any dollar reserves.

TerraUSD, it turned out, was no more stable than radium. In early May, TerraUSD began to stray from the dollar peg for reasons that its inventors could not explain. Like depositors who hear about financial trouble at their bank, TerraUSD owners withdrew their money as quickly as they could. The currency’s value dropped from $1 to a nickel. The collapse of the TerraUSD experiment triggered doubts in the whole concept of cryptocurrencies, and bitcoin wiped out almost all its pandemic-era gains.

What happened to TerraUSD could happen to bitcoin. Unlike almost everything else Fidelity offers in 401(k) plans, bitcoin is not backed by corporate income or national treasuries. Much like TerraUSD, bitcoin’s only intrinsic value is the collective belief in its future.

That belief seems to be fading on Wall Street. Scott Minerd, global chief investment officer of institutional investment firm Guggenheim Partners, an early institutional investor in cryptocurrencies, recently told Bloomberg that his firm sold its bitcoin because the market had been taken over by a “bunch of yahoos.”

At best, bitcoin will be periodically roiled by glitches in the crypto experiment like the TerraUSD. At worst, it could be wiped out by a glitch of its own.

Radioactive materials were great discoveries. But they do not belong in our clocks. Cryptocurrencies do not belong anywhere near our 401(k)s.

Rob Curran is a writer in Denton and a frequent contributor to The Dallas Morning News.

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