Post: Brett Arends’s ROI: Why I don’t want bitcoin in my 401(k)


At long last, the company managing my 401(k) plan will allow me to bet up to 20% of my retirement funds on a digital Ponzi scheme that generates no income and has no practical use.

Fidelity Investments, the biggest manager of 401(k) plans in the country, has announced that it will soon allow bitcoin

among the investible assets, alongside stocks, bonds, real-estate investment trusts and the like. This is probably terrific news for bitcoin. But whether it is equally good news for 401(k) plans remains to be seen.

Read: Bitcoin in your 401(k)? Fidelity just introduced it as an option – when it makes sense, and when it doesn’t

Why is this good for bitcoin? Simple. It gives this very, very, very long string of 1s and 0s a further patina of financial respectability. If a company as renowned as Fidelity is going to allow it in retirement plans, it must be OK, right? And, naturally, this move will greatly increase the market for bitcoin, whose only use seems to be to sell it to other people. Fidelity handles the retirement accounts of 23,000 companies. Its clients have over $11 trillion in their accounts. That’s about 14 times the alleged value of all the bitcoin in the world.

I asked Fidelity why they were making this move. The short answer: Because the customers want it. Fidelity manages 401(k) and other defined-contribution plans on behalf of employers. And a growing number of them have been asking for access to bitcoin — and other “cryptocurrencies” as part of the plan.

Read: Millennials have solved the retirement crisis

The company added: “Fidelity encourages participants to maintain an asset mix within their 401(k) that aligns with their retirement horizon and risk tolerance. Like any other asset within their 401(k), individuals should make sure that any investment in bitcoin is part of their overall asset allocation strategy that maps to their long-term retirement savings goals.” Fidelity says it will work with employers to produce “educational materials” in order to “help employees learn more about digital assets so that they can make informed investment decisions.”

I can’t wait to read them. Maybe one of them will finally explain to me what bitcoin is for. I’ve been waiting for years for someone to do this.

It doesn’t pay interest or dividends. It doesn’t earn income. And it doesn’t have any particular purpose. It’s not better than cash, Apple Pay, Venmo, credit cards, debit cards and so on for buying stuff. It’s not more useful than my bank for transferring money, domestically or internationally. It’s not even as good for money laundering as gold. OK, so I can see it might be useful to get your money out of a war zone or, say, Russia in an emergency. But is that a $800 billion utility?

Meanwhile, in a global climate emergency, it is an unmitigated environmental disaster. The bitcoin network uses more electricity than Poland, for no good purpose whatsoever. Ending this cryptocurrency mania would be the simplest, quickest win for the green economy.

I love it when the same people on social media “like” Greta Thunberg’s latest comments, and share the latest alarming news about climate change, and then. boast about all the cryptocurrencies they’re trading.

(And people say the younger generation doesn’t get irony!)

The sole purpose of bitcoin is making money — real money, in things like dollars — by trading it. bitcoin enthusiasts generally dismiss old skeptics like me by pointing out how much it has risen in price: From nothing 13 years ago, and about $100 a decade ago, to around $40,000 today. And of course they’re right. It has.

Never mind the obvious point that even the enthusiasts are measuring the value of bitcoin in terms of supposed “fiat” currencies like dollars.

The real problem is that this is simply a Ponzi scheme. That doesn’t mean the price can’t keep going up. It could do so indefinitely. But it’s still just a Ponzi scheme. All the gains for existing investors come at the expense of new investors. The new money comes in, the old money cashes out. bitcoin itself does nothing.

Bitcoin has been going for just over 13 years. So what? Bernie Madoff kept his scheme going for at least 17. Call us in another 4 years.

Most other investments have value because they produce income. Stocks have value because they pay out dividends (or in some cases could if they wanted to). Those dividends come from profits, which in turn come from creating value — turning raw materials into a working car or an iPhone, a meal or whatever. (One of the key issues with the U.S. stock market these days is that prices may have risen much further than the companies’ sustainable earnings.)

A company that generated no income, and was never going to, would have no intrinsic value. Imagine becoming a landlord, and buying a house that no one could live in and which could never, ever generate a nickel of rent. What would you pay for it? Why?

Meanwhile bonds, too, have value but only because they pay coupons, which again come out of earnings (or taxes).


has the same theoretical problem as bitcoin. Its long, long history as money, and the vast user base of people willing to accept it as money, provides at least some functionality. It’s golden — pun intended — for money laundering. There’s a long list of criminals breaking rocks who would still be free if they’d used gold instead of banks for their crimes. Bitcoin doesn’t even offer the same protections. The ledger is public. The U.S. Justice Department can track your bitcoins down.

As we’ve seen this year, commodities you can actually use — like oil and gas — have intrinsic value. When someone can explain to me the intrinsic value of bitcoin I’ll be thrilled.

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