A Quick Guide to 401(k) and Bitcoin Secular Bull Market

August 7, 2025 — U.S. President Donald Trump signed an executive order allowing alternative assets such as private equity, real estate, and cryptocurrencies to be included in 401(k) retirement savings plans. This move potentially opens the door for approximately $12.5 trillion in retirement account funds to flow into these sectors.

To understand its potential impact, one must first understand what a 401(k) is.

Simply put, a 401(k) is the most mainstream type of employer-sponsored retirement savings plan in the United States. Employees contribute a portion of their monthly salary to this account, and employers often match a percentage of these contributions as a benefit. This money enjoys tax advantages and is invested in financial products like stocks and bond funds, where it remains until the employee retires.

Its core characteristics can be summarized in three points:

– Long-Term: It is designed for retirement decades away, making the investment horizon extremely long.

– Automated: Funds are automatically deducted and invested on every payday without requiring manual action from the individual.

– Passive: The vast majority of participants do not adjust their investment strategy based on short-term market volatility and may rarely even check their accounts.

Since their popularization in the 1980s, 401(k) plans have funneled vast amounts of capital into the stock market, profoundly influencing it. How large is this volume?

Currently, the narrow definition of 401(k) assets (from corporations) totals approximately $8.7 trillion. When including other retirement plans from non-profits (403(b)) and government employees (457), the figure for these Defined Contribution plans is around $12.5 trillion. Furthermore, the U.S. has about $16.8 trillion in Individual Retirement Accounts (IRAs). (You may see different figures in various media reports, as a presidential executive order typically does not include many implementation details.  However, even $8.7 trillion is still a large number for cryptos.)

This massive and continuous flow of capital has been the unseen driver of the U.S. stock market's "secular bull run" over the past four decades:

– Creating Persistent Buying Pressure: Every month, the salaries of tens of millions of Americans are automatically invested in index funds and blue-chip stocks. This buying is non-emotional; it occurs regardless of market fear or greed, providing a solid floor for the market.

– Smoothing Market Volatility: Due to the extremely long investment horizon and penalties for early withdrawal, 401(k) holders rarely panic-sell during market crashes. On the contrary, their automated investment plans buy more shares at lower prices, effectively "buying the dip" and stabilizing the market.

– Cultivating a Long-Term Investment Culture: It has accustomed the general public to sharing in economic growth through long-term ownership of quality assets, rather than engaging in short-term speculation.

It can be said that the 401(k) has injected a "long-termism" gene into the U.S. stock market, effectively weakening the impact of short-term sentiment.

Now, let's turn our attention to Bitcoin. What would happen if this automated, long-term capital—amounting to hundreds of billions annually and tens of billions monthly—began to flow into Bitcoin?

1. Why Do Bitcoin's Four-Year Cycles and Bear Market Crashes Occur? Currently, Bitcoin's investor base is dominated by speculators seeking high returns. The market is highly sensitive to sentiment, with participants rushing in during the halving cycles and being prone to stampedes when sentiment turns. Consequently, although Bitcoin has trended upwards since its inception, it has experienced average drawdowns of over 80% during its four-year bear markets, with the largest crash reaching 99%. These severe corrections intimidate many potential investors.

1. Will 401(k)s Replicate the 40-Year Bull Run of the Stock Market? The entry of 401(k)s into Bitcoin, much like their entry into the stock market 40 years ago, will introduce tens of millions of "Ultimate HODLers" (long-term investors). Their investment behavior is not driven by market news or technical charts, but by their paychecks. This will dramatically increase the proportion of long-term holders, solidifying Bitcoin's foundation as a store of value.

Bitcoin's four-year cycle is essentially a speculative cycle based on the "supply halving" narrative. People buy in anticipation of a bull market before the halving and take profits at the peak, leading to intense volatility.

However, when the persistent buying pressure from 401(k)s becomes a significant market force, the situation changes. The market's driving force will shift from a "narrative-driven shock every four years" to "automated capital inflows twice a month" (as is common with U.S. payrolls). This stable, predictable flow of funds will act like a wide river, gradually filling the valleys created by cyclical sentiment and smoothing the price curve.

Historically, Bitcoin's massive bear market drawdowns were caused by excessive leverage and speculative bubbles at bull market peaks, coupled with a lack of sustained buying pressure to absorb the sell-off.

The inflow of 401(k) funds will play a crucial role as a "cushion" during bear markets. While speculators are panic-selling, millions of retirement accounts will be automatically buying at lower prices. This structural buying power will significantly increase Bitcoin's resilience during downturns. Future bear market corrections may still be significant (e.g., 30%-50%), but the probability of another extreme crash of -75% to -85% will be greatly reduced.

Of course, this vision will not be realized overnight. For now, incorporating Bitcoin into 401(k)s still faces cautious attitudes from regulators and questions of acceptance from employers. However, the gears of this trend have already begun to turn:

– Financial giants like Fidelity have already pioneered products that allow Bitcoin to be included in 401(k) plans.

– The approval of spot Bitcoin ETFs has cleared the biggest technical and regulatory hurdles for retirement plans to allocate to Bitcoin in a compliant and convenient manner.

The essence of the 401(k) plan is to convert vast, distributed short-term income into concentrated, ultra-long-term capital. It was the "philosopher's stone" that shaped the U.S. stock market's secular bull run. Now, as this stone touches Bitcoin, we have reason to believe it will be the catalyst for Bitcoin's transition from a highly volatile speculative asset to a mature, widely accepted global store of value.

It will not eliminate volatility, but it will use a relentless, steady force to counter the market's short-term frenzy and fear, ultimately breaking the cycle of the four-year boom and bust and guiding Bitcoin—and the broader crypto market—toward a more stable and sustainable "secular bull" era.