This article is reproduced from Sosovalue

On August 7th, Trump issued an executive order expanding the investment menu of the 401(k) plan, the nation's largest retirement fund, from its traditional three-course menu to an alternative buffet. New dishes include private equity, real estate, and digital assets (such as Bitcoin and Ethereum). This marks a historic first, allowing $9 trillion in long-term funds, representing 90 million Americans, to begin investing in the crypto market. While it may take another six to two years for this "elephant" to truly enter the market, once it begins to slowly move, this steady and sustained buying momentum may be the driving force behind a future "slow bull" market in the crypto spot market.

What is a 401(k) retirement plan? Employer-sponsored, employee-participated, automatic deductions, long-term savings

A 401(k) is a long-term retirement savings account opened by American employers for their employees, offering tax advantages. Employees can invest a portion of their salary tax-free into this account, withdrawing it upon retirement. Employers prepare a list of investments (typically 20-30 funds), and employees decide how much of their salary to contribute (e.g., 6%), then select funds from the list and allocate the funds accordingly. Salaries are automatically deducted, and employers often offer a "top-up"—for example, matching half of your contribution as a benefit.

Decision-making power in 401(k) plans: Employers have the final say and must act as "prudent stewards"

In a 401(k) plan, employers have significant influence over which funds are included in the plan. Employees can only choose from the list and cannot add their own funds. When selecting a fund company or custodian, employers must adhere to the "prudent person principle"—applying the same care they would for their own family's finances. If the wrong choice results in employees losing money, the employer may be held legally liable.

401(k) plans are massive: nearly $9 trillion, with over 90 million participants.

Data from the U.S. Department of Labor shows that total 401(k) assets in 2021 were approximately $8 trillion; statistics from the Investment Company Institute suggest that by the first quarter of 2025, this figure will have reached $8.7 trillion. The White House also revealed that more than 90 million Americans are using this plan.

How big is the change this time?

• A historic first: Previously, there were no crypto assets in the 401(k) investment list. This is the first time that the policy has opened the door.
• Potential capital pool: Even if only 2% of 401(k) funds flow into crypto, based on $9 trillion, that would be $170 billion in new buying - and the current global crypto spot ETF and listed reserves combined only add up to $260 billion.
• Market impact: Once such long-term funds enter the market, it will be enough to change the structure of the crypto market - from being dominated by short-term speculation to a price discovery that relies more on long-term funds, forming a steadily rising "slow bull" pattern.

Analyst's view: Even if 401(k) only takes out 2% of the pocket money, the crypto market will immediately have an additional $170 billion - this is almost equivalent to two-thirds of the total amount of existing crypto spot ETFs and listed reserves.

There are still three steps to take before the funds are landed

Don’t be too quick to cheer. Money won’t pour in tomorrow. Expect a rollout period of at least six months to two years.

• The Department of Labor will first issue detailed rules to clarify how 401(k)s should invest in alternative assets, proportion restrictions, product disclosures, etc.
• Service providers design fund products that comply with regulations and include crypto assets.
• Employers decide whether to add these new funds to the investment menu, and employees decide whether to allocate them.

Which type of crypto assets is most likely to be on the market first?

Crypto spot ETFs are the most popular because they are SEC-regulated, have strong compliance, stable custody and valuation mechanisms, and good liquidity. They are likely to be included in target-date funds (TDFs) or balanced funds, potentially accounting for less than 5%, but the impact will still be significant.

Why is this time different from 2020?

In 2020, during the Trump administration, the Department of Labor also made similar noises, allowing 401(k)s to access private assets. However, due to the department's voluntary actions and the illiquidity of private assets, the move ultimately resulted in little action. This time, however, it was completely different:

• Executive orders signed by the president himself are more powerful.
• Crypto ETFs have good liquidity and high acceptance among retail investors.
• Policy coordination with multiple parties including the Ministry of Finance and the SEC is the real top-level design.