Bitcoin’s Success in 2024 Could Lead to Increased Crypto Policy in 2025

The upcoming year looks promising for cryptocurrency enthusiasts, with the bitcoin-friendly administration of President-elect Donald Trump on the horizon. This could lead to more states being open to crypto, and even public pension funds and treasuries considering investments in it.

Advocates of cryptocurrency argue that it serves as a valuable hedge against inflation, similar to gold. They believe that increased government involvement will stabilize bitcoin’s price and give it more legitimacy. However, critics warn that investing in crypto is highly speculative and comes with significant risks.

While only a few public pension funds have dabbled in cryptocurrency so far, the landscape could be changing. A recent U.S. Government Accountability Office study highlighted the unique volatility of crypto investments, making it a potentially risky endeavor.

Legislation related to crypto is expected to be introduced in more states in the coming year, reflecting the growing influence of the crypto lobby. Additionally, there may be discussions at the federal level about creating a federal bitcoin reserve.

When it comes to public pension funds, many professionals overseeing trillions of dollars in assets are cautious about investing in cryptocurrency. The short track record and high volatility of bitcoin may not align with the risk profiles they typically seek in investments.

Treasurer John Fleming of Louisiana has taken steps to allow people to pay government agencies in cryptocurrencies. However, he remains skeptical about the merits of investing personal or state funds in bitcoin, citing concerns about its long-term viability.

In Pennsylvania, officials have the authority to assess if cryptocurrencies meet investment standards without new legislation. However, the highly volatile nature of crypto may not align with their need for predictability in managing finances.

Despite the cautious approach of pension boards, the approval of bitcoin ETFs by the U.S. Securities and Exchange Commission has opened up new investment possibilities. Major asset managers like BlackRock, Invesco, and Fidelity are already offering bitcoin ETFs to investors.

Some states have already dipped their toes into the world of crypto investments. Wisconsin became the first state to invest in bitcoin ETFs, followed by Michigan and plans by New Jersey to consider similar investments in the future.

As the landscape of cryptocurrency continues to evolve, it remains to be seen how public pension funds and treasuries will navigate the opportunities and risks presented by this rapidly changing market.