Bitcoin has experienced significant losses, yet on the 12th, news emerged that two pension funds are planning to invest in Bitcoin and other digital assets.
This is not a joke. Two pension funds from Virginia, USA, have announced their entry into the digital currency space.
"We believe Bitcoin has the potential to rescue the U.S. from the impending pension crisis," declared the head of the institution managing these pension investments.
In 2018, the cryptocurrency market collapsed entirely, with the total market capitalization of digital currencies evaporating by $727.6 billion, an 87.76% year-over-year decline. Since 2019, Bitcoin prices have remained below $4,000, officially entering the "longest bear market in history," having fallen more than 80% from its peak in January 2018.
Public Pension Funds Enter the Digital Currency Space
The U.S. pension industry is well-developed and comprehensive, with the "three pillars" of retirement security consisting of social basic security, employer-sponsored pension plans (also known as corporate pension accounts), and individual retirement accounts (IRAs).
By the end of 2017, the total assets of U.S. pension funds reached a staggering $28.2 trillion, equivalent to 145% of the U.S. GDP for that year.
Two pension funds from Fairfax County, Virginia—the Fairfax County Police Officers Retirement System and the Fairfax County Employees' Pension Plan—have become investors in a new digital currency fund under Morgan Creek Digital, a digital asset management company. Reports indicate that this marks the first time a U.S. pension fund has invested in the digital currency sector.
Morgan Creek Digital's fund has a size exceeding $40 million. The company's founder, Pompliano, stated that the fund initially aimed to raise $25 million but nearly doubled its target due to strong investor interest. The fund will focus on equity investments in blockchain and digital asset companies while holding a small portion of liquid cryptocurrencies like Bitcoin.
He also revealed that the fund primarily invests in major players in the digital currency space, including Bakkt, Coinbase (a cryptocurrency exchange co-owned by Starbucks and the New York Stock Exchange's parent company, Intercontinental Exchange), and other blockchain and crypto startups.
Katherine Molnar, Chief Investment Officer of the Fairfax County Police Retirement Pension System, expressed optimism about digital assets and blockchain technology, describing it as a "unique and compelling application." Mati Greenspan, a senior analyst at eToro, also noted that "the timing is right, with prices down over 80% from their all-time highs, making this an opportune moment for large fund managers to dip their toes in."
👉 Discover how institutional investors are navigating the crypto market
Can Digital Currencies Rescue Nations from Pension Crises?
"Pension funds still need time to adapt to Bitcoin investments, but I believe Bitcoin has the potential to save the U.S. from the impending pension crisis," said Pompliano, founder of Morgan Creek Digital.
Pension funds have long been the most important institutional investors in the U.S. capital markets. By the end of 2017, corporate pension DC plans and IRAs held nearly $9 trillion in mutual funds, accounting for almost 50% of the market.
U.S. pension funds prioritize long-term investment returns, emphasizing risk diversification and asset allocation. As early as 2016, discussions emerged in the U.S. about incorporating digital assets into alternative investment strategies for pension funds. Notably, the California Public Employees' Retirement System (CalPERS) considered entering the digital currency space as far back as 2016.
In reality, Canada's Ontario Retirement Pension Plan has also invested in the decentralized marketplace OpenBazaar through venture capital firms.
Additionally, reports suggest that South Korea's National Pension Fund—the world’s third-largest public pension fund—invested nearly 2.6 billion KRW in four cryptocurrency exchanges through two venture capital firms. However, due to regulatory restrictions on digital currencies in South Korea, government officials have criticized such investments as "inappropriate."
Bitcoin Struggles to Escape Bear Market; Buffett Warns of Dependency on Greater Fools
The pension funds' entry into digital currencies and blockchain may indicate institutional attempts to capitalize on the bear market for bargain hunting. Yet, the panic triggered by the collapse of digital asset prices still lingers across the market.
Analysts at JPMorgan Chase warn that the ongoing downturn in digital assets is deterring institutional investors. Key liquidity indicators, including futures market activity and average trading volume, have significantly slowed. Open interest in Bitcoin futures on Cboe and CME, the largest options and futures exchanges, has noticeably declined.
Mike Novogratz, CEO of Galaxy Digital, acknowledged that the crypto winter might last longer than anticipated but expressed confidence in institutional adoption.
Meanwhile, debates over the intrinsic value of digital currencies continue. A KPMG report on cryptocurrencies noted that assets like Bitcoin fail as a medium of exchange or store of value due to their lack of trust and scalability. Warren Buffett has famously likened cryptocurrencies to "rat poison," arguing they rely on greater fool theory rather than productive value.
As trading volumes and prices plummet, once-lucrative mining machine manufacturers now face challenges, with mining farms shutting down and equipment being sold by weight. The top three mining machine manufacturers—Bitmain, Canaan Creative, and Ebang—have suspended their plans for Hong Kong IPOs.
Hong Kong Exchange CEO Charles Li stated at the World Economic Forum in Davos that these companies fail to meet the core principle of "listing suitability." Whether in mining or their attempted pivot to AI, none of these firms satisfy Li’s criteria.
👉 Learn more about the future of digital currencies
FAQs
Q1: Why are pension funds investing in digital currencies?
A1: Pension funds seek diversification and high-growth opportunities amid low-interest-rate environments. Bitcoin's potential as a hedge against economic instability makes it attractive despite its volatility.
Q2: Is now a good time to invest in Bitcoin?
A2: While prices are significantly lower than their peak, the market remains highly speculative. Institutional entry may signal long-term potential, but risks persist.
Q3: How does blockchain technology benefit pension systems?
A3: Blockchain can enhance transparency, reduce administrative costs, and improve asset tracking, making pension management more efficient.
Q4: What are the risks of pension funds investing in crypto?
A4: Volatility, regulatory uncertainty, and lack of intrinsic value are major concerns. Overexposure could jeopardize retirees' financial security.
Q5: Has any pension fund successfully profited from crypto investments?
A5: It’s too early to tell, as most pension funds have only recently begun experimenting with crypto allocations.
Q6: What did Warren Buffett say about Bitcoin?
A6: Buffett called it "rat poison squared," criticizing its reliance on speculative trading rather than productive value.