Crypto market could grow 15x if pension funds allocate 0.5% to digital assets

In the quest for financial security and long-term stability, American citizens have traditionally turned to a well-balanced allocation of retirement funds in blue-chip stocks, investment-grade bonds, real estate, and gold, among other assets. This strategic approach allows individuals to maintain a steady rate of return and hedge against the impacts of inflation.

While the world of investments has seen the rapid rise of cryptocurrencies in recent years, these digital assets have yet to gain significant traction as preferred retirement allocation assets.

Currently, there is around $60 trillion in US pension funds, and $250 trillion in private retirement savings, an investor and popular Twitter user Adam Cochran said on June 22.

Of those funds, 3% are allocated into gold, and an additional 20% into alternative assets, Cochran noted. If just 0.5% of that 23% were allocated to crypto, the market would experience roughly 15x growth, the expert added.

Visual representation of the allocation of US retirement assets over the years. Source: Adam Cochran

Crypto’s value to cash ratio

Cochran also said that crypto currently has a “1:0.12 value to cash ratio,” which means that cryptocurrencies are valued at approximately 12% of their corresponding cash value at the moment.

This ratio serves to offer insight into the exchange rate between crypto assets and fiat currencies, reflecting the relative worth of a cryptocurrency when compared to traditional money.

Can crypto become one of the favored retirement assets?

Although cryptocurrencies haven’t been preferred as retirement assets in the US, this trend may experience a shift in the future due to the ever-changing market conditions.

In early 2022, Fidelity Investments became the first major traditional finance (TradFi) firm to offer investors the chance to add cryptocurrencies to their 401(k) retirement accounts. Fidelity is one of the largest retirement plan providers in the country, holding over $2 trillion in 401(k) assets.

Several months later, ForUsAll, a 401 (k) plan provider targeting startups and small businesses, followed suit. In September 2022, the company also launched crypto to 401(k) savers, allowing them to invest in Bitcoin (BTC), Ethereum (ETH), Solana (SOL), Polkadot (DOT), Cardano (ADA), and USDC.

As the cryptocurrency market continues to evolve and mature, accompanied by increased acceptance and adoption, individuals may reconsider including digital assets in their retirement portfolios to potentially benefit from their growth and diversification opportunities.