Bitcoin and other digital assets are quietly growing in many nest eggs, with the encouragement of the Trump administration. Hidden risks are mounting, our columnist says.
The president of the United States and his family are selling and promoting memecoins. The vice president told a Bitcoin convention in Las Vegas last month that “crypto finally has a champion and an ally in the White House.”
Before taking office, the new chairman of the Securities and Exchange Commission was a cryptocurrency investor, adviser and advocate. And the Department of Labor last month rescinded its warning against putting cryptocurrency in retirement portfolios.
To say that these are good times for Bitcoin and other digital currencies is like stating that tariffs are rising sharply under the Trump administration. It’s obvious that the world is changing in dangerous ways, but we don’t yet know all the consequences. What is clear is that the rise of cryptocurrency is beginning to affect working people who are saving for retirement or for a child’s education or for the purchase of a home.
In fact, cryptocurrency may already be snuggled in your nest egg, whether you know it or not. I pointed out last year that many retirement portfolios — including my own — contained Bitcoin indirectly, through broad, diversified index funds that owned a company then known as MicroStrategy. It changed its name in February to just plain Strategy, which its founder, Michael J. Saylor, said was better for the brand. The company runs a declining software business, but it keeps growing anyway. Its main assets, if you want to call them that, are Bitcoin and market frenzy.
What’s more, just last month the S&P 500 welcomed into its ranks Coinbase, a company that owns Bitcoin and other cryptocurrencies outright and, more important, serves as a major trading platform and repository for all manner of digital assets. In addition, Tesla, the automaker led by Elon Musk and an important member of the S&P 500, owns more than $1 billion in Bitcoin.
Scores of other publicly traded companies have followed in Strategy’s footsteps and now hold Bitcoin or other cryptocurrencies on their balance sheets, in addition to traditional assets like cash or bonds. The shares of Bitcoin-heavy companies usually trade at a higher value than their underlying Bitcoin holdings. That won’t last forever. When Bitcoin plummets — as it did a few years ago — these companies, and the many investors who hold shares directly or through broad diversified funds, will be hurt, too.