Looking back at the development of 401(k), its key turning point was during the Great Depression when pension reforms allowed investments in stocks. Despite differing historical and economic contexts, this change has many similarities with the current trend of introducing cryptocurrency assets. This article is based on a piece by Chen Mo cmDeFi, organized and written by Deep Tide TechFlow. (Background: Bitcoin's antagonist Peter Schiff: Trump's opening up of 401(k) to invest in BTC will only exacerbate America's 'retirement crisis') (Additional Background: Trump will allow 401(k) retirement funds to invest in Bitcoin! Vice President Vance: Soon, 100 million Americans will own BTC) Pension funds buying cryptocurrency assets are equivalent to 'stockpiling coins,' which is another form of 'strategic reserve of cryptocurrency assets.' On August 7, 2025, President Trump signed an executive order allowing 401(k) retirement savings plans to invest in more diversified assets, including private equity, real estate, and newly introduced cryptocurrency assets. This policy can be interpreted as providing 'national-level' endorsement for the crypto market, releasing signals that drive the maturation of the crypto market. Pensions expand diversified investments and returns but introduce higher volatility and risk. In the crypto realm, this is already significant enough to be recorded in history. Looking back at the development of 401(k), its key turning point was during the Great Depression when pension reforms allowed investments in stocks. Despite differing historical and economic contexts, this change has many similarities with the current trend of introducing cryptocurrency assets. 1/6 - The Pension System Before the Great Depression: From the early 20th century to the 1920s, pensions in the U.S. primarily consisted of defined benefit plans, where employers promised stable monthly pensions for employees after retirement. This model originated from the industrialization process of the late 19th century, aimed at attracting and retaining labor. The investment strategies of pension funds during this stage were highly conservative. The prevailing view at the time was that pensions should prioritize safety over high returns, restricted by the 'Legal List' regulations, mainly limited to low-risk assets such as government bonds, high-quality corporate bonds, and municipal bonds. This conservative strategy worked well during economic prosperity but also limited potential returns. 2/6 - The Impact of the Great Depression and the Pension Crisis: The stock market crash of October 1929 marked the beginning of the Great Depression, with the Dow Jones index falling nearly 90% from its peak, triggering a global economic collapse. Unemployment soared to 25%, and countless businesses went bankrupt. Although pension funds had minimal investments in stocks at that time, the crisis still impacted them indirectly. Many employer companies failed and could not fulfill pension commitments, leading to interruptions or reductions in pension payments. This raised public skepticism about employers' and governments' ability to manage pensions, prompting federal intervention. In 1935, the Social Security Act was enacted, establishing a national pension system, but private and public pensions remained locally dominated. Regulators emphasized that pensions should avoid 'gambling' assets like stocks. ... Turning Point: After the crisis, the economic recovery was slow, and bond yields began to decline (partly due to federal tax expansion), laying the groundwork for subsequent reforms. The situation of insufficient yields gradually became apparent, making it difficult to cover promised returns. 3/6 - Investment Shift and Controversy in the Post-Great Depression Era: After the Great Depression, particularly during and after World War II (1940s-1950s), pension investment strategies began to slowly evolve from conservative bonds to include equity assets such as stocks. This transition was not smooth and was accompanied by intense controversy. The post-war economic recovery saw the municipal bond market stagnate, with yields dropping to a low of 1.2%, failing to meet pension guaranteed returns. Public pensions faced 'deficit payment' pressures, increasing the burden on taxpayers. At the same time, private trust funds began to adopt the 'Prudent Man Rule,' a rule originating from 19th-century trust law but reinterpreted in the 1940s to allow for diversified investments in pursuit of higher returns as long as the overall investment was 'prudent.' This rule initially applied to private trusts but gradually began to influence public pensions. In 1950, New York State was the first to partially adopt the Prudent Man Rule, allowing pensions to invest up to 35% in equity assets (such as stocks). This marked a shift from the 'Legal List' to flexible investments. Other states followed suit, with North Carolina authorizing investments in corporate bonds in 1957 and allowing a 10% allocation to stocks in 1961, increasing to 15% by 1964. This change triggered significant controversy, with opponents (mainly actuaries and labor unions) arguing that investing in stocks repeated the mistakes of the 1929 crash, putting retirement funds at risk of market volatility. Media and politicians labeled it 'gambling with workers' hard-earned money,' fearing pension collapses during economic downturns. To mitigate controversy, investment percentages were strictly limited (initially no more than 10-20%) and prioritized 'blue-chip' stocks. For a while, benefiting from the post-war bull market, the controversy gradually faded, proving its return potential. 4/6 - Subsequent Developments and Institutionalization: By 1960, non-government securities accounted for over 40% of public pensions. New York City's municipal bond holdings fell from 32.3% in 1955 to 1.7% in 1966. This transition reduced taxpayer burdens but made pensions more dependent on the market. In 1974, the Employee Retirement Income Security Act (ERISA) was enacted, applying the prudent investor standard to public pensions. Despite initial controversy, stock investments were ultimately accepted, though it also exposed issues, such as significant pension losses during the 2008 crisis, reigniting similar debates. 5/6 - Signal Release: The current introduction of cryptocurrency assets into 401(k) plans bears a striking resemblance to the earlier controversies surrounding the introduction of stock investments, both involving a leap from conservative investments to high-risk assets. Clearly, the current maturity of cryptocurrency assets is lower and their volatility higher, which can be seen as a more radical pension reform, releasing some signals from here. The promotion, regulation, and education of cryptocurrency assets will all advance to assist people's acceptance levels and risk awareness of such emerging assets. From a market perspective, the inclusion of stocks in pension plans benefited from the long bull market in U.S. stocks, and for cryptocurrency assets to replicate this path, they must also achieve a stable upward market. Additionally, since 401(k) funds are effectively locked in, pension investments in cryptocurrency assets are equivalent to 'stockpiling coins,' which is another form of 'strategic reserve of cryptocurrency assets.' No matter how it is interpreted, this is a huge positive for Crypto. The following is supplementary information; professionals may skip this part. 6/6 - Appendix - The Meaning and Specific Operating Mechanism of 401(k): A 401(k) is an employer-sponsored retirement savings plan under Section 401(k) of the U.S. Internal Revenue Code, introduced in 1978. It allows employees to contribute to individual retirement accounts through pre-tax wages (or after-tax wages, depending on the specific plan) for long-term savings and investments. A 401(k) is a 'defined contribution plan,' differing from a traditional 'defined benefit plan,' with the core being joint contributions from both employees and employers...

#BTC