Trump's 401k encryption bill is implemented, how will 12 trillion in pensions reshape the crypto market?

On August 7, Trump signed an executive order titled "401(k) Plan for the Democratization of Alternative Asset Investment", directing the U.S. Department of Labor to reassess the restrictions on retirement savings plans regarding alternative assets. This order requires regulators to allow private sale equity, real estate, and Crypto Assets into 401(k) retirement account portfolios.

The policy directly leveraged the $12.5 trillion 401(k) pension market in the United States. Even if only 3% of the funds are allocated to Crypto Assets, it will bring about $24 billion in new inflows.

Policy Turning Point, Crypto Assets Gain Institutional Recognition

This executive order marks a significant shift in U.S. pension investment policy. The Trump administration has directed the Department of Labor, the Treasury Department, and the SEC to explore necessary regulatory reforms to promote the inclusion of alternative assets in retirement accounts.

The policy is backed by long-term lobbying from private capital groups like BlackRock and Apollo Global Management. These institutions have long targeted the massive retirement market in the United States - since 2007, the funds managed under 401(k) have tripled in size, reaching trillions of dollars.

The executive order specifically emphasizes the legal status of Crypto Assets, calling for a redefinition of ERISA fiduciary standards to eliminate legal barriers for including digital assets such as Bitcoin in retirement accounts. This is not an isolated action, but rather a continuation of a series of Crypto-friendly policies from the Trump administration:

• In the summer of 2025, the White House will host a "Crypto Week" to discuss the regulation of stablecoins.
• Consider establishing a national Bitcoin reserve
• Support the Congress in passing multiple crypto-related bills

Market Immediate Reaction, Three Major Coins Lead the Surge

After the policy news was released, the Crypto Assets market surged in response:

• Bitcoin breaks through the key resistance level of $118,000, with a technical target aimed directly at the psychological level of $120,000.
• Ethereum has risen by 16% over the week, strongly rebounding from the support level of $3,397 to the key level of $3,900.
• XRP performed the most aggressively, surging 11% to $3.33 over the week, just a step away from its historical high of $3.66.

Strong capital inflow has been observed in digital asset ETPs (exchange-traded products). According to the latest report from CoinShares on August 12:

• Net inflow for the entire week was approximately $572 million, reversing an earlier outflow of $1 billion.
• Ethereum ETP performed outstandingly, with an inflow of $268 million in a single week, driving its assets under management to a historical high of $32.6 billion.
• Bitcoin products saw a net inflow of $206 million.

The market sentiment indicator "Crypto Fear and Greed Index" soared to 75, indicating strong bullish momentum and increased investor confidence.

Restructuring Capital Patterns, Trillions of Funds Open Long-term Channels

The impact of policies goes far beyond short-term price fluctuations. The potential inflow of $12.5 trillion into 401(k) assets in the United States will fundamentally change the funding source structure of the Crypto Assets market.

Traditional pension funds have three main characteristics: long-term holding, risk diversification, and regular investment. These features will significantly reduce the volatility of the crypto market and enhance institutional acceptance.

Traditional financial institutions like BlackRock have begun to take action:

• The world's largest asset management firm BlackRock announced the launch of a target-date 401(k) fund in the first half of 2026, with 5%-20% of assets allocated to the private sale market (including Crypto Assets).
• Empower, the second-largest retirement plan service provider in the United States, will collaborate with asset management companies such as Apollo to introduce alternative asset allocation in some accounts later this year.

According to Ainvest's analysis, the allocation logic of institutional funds will show clear differentiation:

• Bitcoin as digital gold will become the core allocation of retirement portfolios.
• Ethereum attracts funds seeking stable returns with its smart contract platform value and staking rewards.
• XRP is favored by conservative investors due to its practicality in cross-border payments and regulatory compliance advantages.

Controversies and Risks, High Fees and Liquidity Concerns

Despite the enticing prospects, the criticism is equally strong. Opponents argue that this move could turn retirement savers into "guinea pigs" for private equity and Crypto Assets.

Cost issues are paramount. The annual management fee for private equity funds reaches 1%-2%, with performance fees as high as 20%. In contrast, the average annual cost for passive U.S. funds in 2024 is only 0.11%.

Knut Rosta, co-founder of the Nonprofit Organization Trust Standards Institute, warned: "The result will be a huge 'train wreck', and many people's retirement accounts will vanish."

The deeper risk is that:

• Liquidity Trap: The lock-up period for private sale assets can last up to 10 years, and Crypto Assets also face difficulties in selling during panic periods.
• Lack of Transparency: Insufficient disclosure of private asset information, ordinary investors lack professional assessment capabilities.
• Institutional Cashing Out Suspicions: New York pension fund sells $5 billion in PE assets to Blackstone at a discount in 2025, elite institutions are withdrawing.

SageMint Wealth partner Anh Tran pointed out: some investors may be attracted by the potential high returns of alternative investments, but fail to fully understand their characteristics.

Investor Strategies: Seizing Opportunities and Managing Risks

In the face of historic policy shifts, investors need to balance opportunities and risks:

• Channel Selection: Prioritize allocation through regulated instruments such as Bitcoin ETFs and ETPs, which now account for 48% of the daily BTC trading volume (average daily $3 billion)
• Position Control: Ainvest recommends that the proportion of Crypto Assets in retirement accounts be controlled at 5%-10%.
• Long-term perspective: Utilize the characteristics of regular contributions from pensions to reduce the impact of short-term fluctuations.
• Risk Isolation: Avoid excessive concentration on a single asset, especially high-volatility Crypto Assets.

Professional financial planners generally advise that unless investors fully understand the risk of losing all their principal, they should not engage in such investments.

Future Outlook

With BlackRock announcing the launch of a target date fund containing private sale and Crypto Assets allocation in 2026, traditional financial giants have begun to lay the pipeline for institutional funds to enter the crypto market.

The shift of $12.5 trillion in pension funds will not happen overnight. But once the floodgates open, the trickle of funds flowing into the crypto market will eventually converge into a river. The available supply of Bitcoin on exchanges has dropped to a seven-year low of 2.5 million coins, while institutional treasury holdings have surpassed 1 million coins.

When tens of trillions of dollars in retirement demand meet persistently tightening supply, the next crypto bull market may not just be a speculative frenzy, but a structural reset of institutional capital.