Trump greenlights crypto in 401(k)s, dismantling Biden-era safeguards

• Trump’s 401(k) crypto move could fuel more demand for BTC than ETFs. 
• Glassnode projected the asset may eye $120K as profit-taking activities remained subdued. 

The Trump administration has relaxed a Biden-era guidance that barred retirement plans, 401(k), from investing in Bitcoin [BTC] and other cryptocurrencies.

In a statement on the 28th of May, the Department of Labor rescinded the 2022 directive that warned of ‘extreme care’ before including crypto into 401(k) investment plans.

However, the agency clarified that the U-turn doesn’t mean an endorsement of digital assets but a neutral stance. 

New demand for BTC?

Most ETF analysts and asset managers viewed the update as a new massive demand angle for BTC. Bitwise Europe head of research, Angre Dragosch, said, 

“This was by far the bigger news today. Approximately $8.9 trillion are managed in 401k plans in the US. Bitcoin demand shock incoming.”

For his part, Ryan Rasmussen, another Bitwise top analyst, noted that a 1% demand from 401ks could outpace ETF inflows. 

“If just 1% of the $8 trillion in 401k funds flows into Bitcoin, that’s $80 billion of new demand, and 2x more than what’s flowed into Bitcoin ETFs.”

For perspective, BTC doubled from $36K to $72K in the Q1 2024 after U.S. spot ETFs debuted. Overall, the asset has rallied nearly 180% to over $110K since early 2024. But it has briefly retraced to $107K at press time.  

BTC to eye $120K, says Glassnode

However, on-chain signals suggested that BTC may eye $120K, according to Glassnode. In its weekly on-chain report on 28 May, the firm said, 

“In the event of further upside, the $120k level appears as a key zone of interest, with sell-side pressure expected to accelerate in and around this zone based on on-chain price models intersected in prior cycles.” 

The firm’s $120K projection was based on MVRV extreme deviation pricing bands. In early and late 2024, BTC price consolidated between extreme bands (red and orange). Currently, this translated to $120K and $100K levels. 

It’s worth pointing out, however, that profitability of STH (short-term holders) has surged 16% per the SOPR indicator.

But CryptoQuant’s Axel Adler noted that selling pressure was relatively muted to past profit-taking activity to threaten BTC from climbing higher. 

Put differently, the drop from over $111K to $107K may just be a brief cool-off before a potential rebound. 

That said, the closest price magnet in the short-term was liquidity pool between $104.4K and $106.2K. Over $5B of leveraged longs were piled in this region, raising liquidation risks if BTC slips to $103K. 

On the other hand, a whopping $10B of leveraged shorts could be wiped out if BTC jumps to $113K.