Not everyone is on board with Fidelity’s plan to allow bitcoin in 401(k) plans, especially with the asset’s recent extreme volatility. Senator Elizabeth Warren and Senator Tina Smith sent a letter to the CEO of Fidelity asking the company to explain why they have not followed the Department of Labor (DOL) warning about 401(k) crypto investments and raised their concerns. voicing about potential conflicts of interest presented by Fidelity is both a bitcoin miner and a provider of bitcoin.
Cash App Borrow: How to Borrow Money on Cash App
Read: 9 Bills You Should Never Pay Automatically
We are writing to inquire about the appropriateness of your company’s decision to add bitcoin to the 401(k) investment plan menu and the actions you will take to mitigate ‘the significant risks of fraud, theft and loss’ of these assets. to get it,” the Senators wrote in the May 5 letter.
On April 26, Fidelity Investments launched what it sees as the industry’s first offering that will allow investors to have some of their retirement savings allocated to bitcoin through its core 401(k) plan investment series.
The new offering, which bitcoin bull firm MicroStrategy plans to add to its 401(k) plan later this year, will be widely available to employers by mid-year.
“Fidelity is excited to launch a premium workplace digital asset account that allows individuals to allocate a portion of their retirement savings to bitcoin through the core 401(k) plan lineup. This new offering represents the ongoing commitment of the company developing and broadening its digital asset offering amid steadily growing demand for digital assets across all investor segments,” Dave Gray, head of pensions and workplace platform offerings at Fidelity Investments, said at the time. GOBankingRates.
The senators added in the letter that “investing in cryptocurrencies is a risky and speculative gamble, and we are concerned that Fidelity would take these risks with millions of Americans in retirement savings.”
POLL: Do you think the Fed’s interest rate hike will help or harm the economy?
Amid a bloodbath in the market following the Fed’s decision last week, cryptos have not been spared. On May 9, Bitcoin hovered around $32,000, 52% lower than its all-time high of $69,044, which was reached in November 2021, according to CoinGecko.
Simon Peters, market analyst at eToro, wrote in a note on May 9 that the worry for crypto-asset investors now is when the slide will end.
“The market has been caught up in the broader adversity of investment markets competing to decide where comfortable levels are in the wake of interest rate hikes designed to quell rising inflation in the Western world,” he wrote in the note sent to GOBankingRates. . “The market is now moving more closely with other large risk assets, such as technology and other stocks. This is indicative of the major shift in the presence of institutions within the crypto asset market, which are now taking into account[s] for a much larger share of ownership and[s] to bundle their crypto decision-making with other key assets.”
Peters added that market volatility and underperformance tend to correct over time, so it is now critical for investors to ensure they are happy with their investment cases and prepared to stay on track for more volatility in the future.
Finally, in the letter, the senators added that bitcoin’s volatility is “exacerbated by its sensitivity to the whims of just a handful of influencers. Elon Musk’s tweets alone have led to bitcoin’s value swings as high as 8%. concentration of bitcoin ownership and mining exacerbates these volatility risks.”
See: 22 Side Gigs That Could Make You Richer Than a Full-Time Job
Find† 25 Extra Groceries You’re Probably Forgetting
In an email to CNN, Fidelity said that “As a Massachusetts-based company with a proven history of more than 75 years of doing what is in the best interests of our customers, we look forward to continuing our respectful dialogue with policymakers to responsible access with all appropriate consumer protection and educational guidance for plan sponsors considering offering this innovative product.”
More from GOBankingRates
About the author
Yael Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including: Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major New York City financial firms, including New York Life and MSCI. Yael is now a freelancer and most recently co-authored the book “Blockchain for Medical Research: Accelerating Trust in Healthcare”, with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in journalism from New York University and one in Russian studies from Université Toulouse-Jean Jaurès, France.