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

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 alternative assets in retirement savings plans. This order requires regulators to allow private 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 capital inflows.

Policy Turning Point, Crypto Assets Gain Institutional Recognition

This executive order marks a significant shift in U.S. retirement investment policy. The Trump administration is asking the Departments of Labor and Treasury, along with the U.S. Securities and Exchange Commission, to explore necessary regulatory reforms to facilitate the inclusion of alternative assets in retirement accounts.

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

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

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

Market Instant Reaction, Three Major Coins Lead Surge

After the release of policy news, the Crypto Assets market surged immediately:

• Bitcoin breaks through the key resistance level of $118,000, with a technical target aiming directly at the psychological level of $120,000.
• Ethereum's weekly increase reached 16%, 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 inflows have been seen in digital asset ETPs (Exchange-Traded Products). According to the latest report by CoinShares on August 12:

• The total net inflow for the week is approximately $572 million, reversing an earlier outflow of $1 billion.
• Ethereum ETP performed outstandingly, with an inflow of $268 million in a single week, pushing its assets under management to a historic high of $32.6 billion.
• Bitcoin products see a net inflow of $206 million.

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

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

The impact of policies goes far beyond short-term price fluctuations. The potential influx of $12.5 trillion into 401(k) assets in the United States will fundamentally change the structure of funding sources in the crypto 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 such as 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 its assets allocated to the private sale market (including Crypto Assets).
• The second largest retirement plan service provider in the United States, Empower, will collaborate with asset management companies such as Apollo to introduce alternative asset allocation in some accounts later this year.

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

• Bitcoin, as digital gold, will become a core allocation in retirement portfolios.
• Ethereum attracts funds seeking stable returns with its smart contract platform value and staking yields.
• 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, there is also a strong wave of criticism. Opponents believe that this move could make retirement savers "guinea pigs" for private equity and Crypto Assets.

Cost issues are paramount. The annual management fee for private equity funds reaches 1%-2%, and performance fees can be as high as 20%. In contrast, the average annual cost of 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 disappear."

The deeper risk lies in:

• Liquidity Trap: Private sale assets are locked for 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 evaluation ability.
• Institutional cash-out suspicion: New York pension fund sells $5 billion PE assets to Blackstone at a discount in 2025, elite institutions are withdrawing.

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

Investor Strategies to Seize Opportunities and Manage Risks

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

• Channel selection: Prioritize allocation through regulated tools 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 allocation of crypto assets in retirement accounts be controlled at 5%-10%.
• Long-term perspective: Utilize the regular investment characteristics of pension funds to reduce the impact of short-term volatility.
• 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

As BlackRock announced the launch of a target date fund in 2026 that includes private sale and Crypto Assets allocations, traditional financial giants have begun to lay the pipeline for institutional funds to enter the crypto market.

The shift of 12.5 trillion dollars in pension flows will not happen overnight. But once the funding floodgates are opened, the trickle 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 the demand for tens of trillions of dollars in retirement funds meets a continuously tightening supply, the next crypto bull market may not just be speculative frenzy, but a structural reset of institutional capital.