10.11 The crash was just a pitfall: the real plot is 401(k) entering the market.

After experiencing the terrifying night of “10.11”, confidence in the crypto market has dropped to freezing point. Although long positions have attempted multiple counterattacks during the bottom-building process, they have ultimately collapsed repeatedly due to weak buying power, leaving the market in a state of anxiety. It is worth noting that while the crypto market is fluctuating and weakening, the US stock market, A-shares, and commodities have all maintained a strong rise overall. This stark contrast has further intensified concerns in the market about the deeper and broader impacts that the “10.11” crash might bring.

Unlike the major impact on institutions caused by the LUNA crash, which triggered a systemic wave of liquidations, the “10.11” crash appears more like a structural cleansing targeting leveraged retail investors. The heavily impacted group is highly concentrated among small to mid-sized investors who took on high leverage to long altcoins and participated in circular loan arbitrage, effectively isolating the risk within the realm of retail speculation, without spreading to the institutional level or triggering a systemic credit collapse and comprehensive liquidity tightening.

However, due to the generally low leverage of the liquidated altcoin positions, the $40 billion in liquidations resulted in exceptionally severe actual losses. This “uprooting” style of market clearing not only brought about a drastic wealth destruction effect but also severely weakened the short-term purchasing power in the market, leading to a prolonged period of consolidation and turbulence.

Despite the severe impact of the “10.11” crash on the market, institutional confidence has not wavered in the slightest. In a sense, this deep correction is viewed as a rare “golden pit,” providing an opportunity for institutions to lay out their long-term strategies.

First of all, during the week of the crash, the crypto DAT company BitMine increased its holdings by 203,826 ETH against the trend, raising its share of Ethereum supply to 2.7%, with the buying pace unaffected by market panic. Meanwhile, BlackRock's spot Bitcoin ETF (IBIT) recorded a net inflow of $210.9 million on October 22, the day after the plunge, as institutions are making significant investments through compliant channels. BitMine Chairman Tom Lee stated that Ethereum's super cycle will not be interrupted by deleveraging events, and the current price dislocation presents “extremely attractive risk-reward opportunities.”

Secondly, after the crash on October 11, Morgan Stanley announced that the bank would allow its financial advisors to offer cryptocurrency investments to all clients, regardless of their risk tolerance or net worth, covering all account types, including retirement plans. Previously, this option was limited to clients with at least $1.5 million in assets, a higher risk appetite, and taxable brokerage accounts. Notably, Trump had just lifted the restrictions on 401(k) pension investments in cryptocurrency in August—at this time, the market correction seems to have a “picking up people on the way back” implication.

At the same time, Citigroup announced that it will provide custody and tokenization services for certain institutional clients. This means that some clients can hold and trade Bitcoin and Ethereum on the Citigroup platform. More importantly, JPMorgan will soon support institutional clients using Bitcoin and Ethereum as collateral for loans, marking a significant move by major Wall Street banks to incorporate encryption into the core business of the traditional financial system ( milestone event ).

Currently, the allocation of cryptocurrency in global sovereign wealth funds and pension funds remains extremely low, almost negligible. A survey conducted in August 2025 showed that only 9% of pension fund managers surveyed made structural allocations; the weighted average allocation ratio of all responding institutions was as low as 0.3%. The overall attitude of sovereign wealth funds is even more cautious, with an overall allocation ratio of less than 0.1%. Nevertheless, the market has recently welcomed a symbolically significant 'breakthrough of zero': in October 2025, the Luxembourg Intergenerational Sovereign Wealth Fund (FSIL) announced that it would allocate 1% of its assets to a Bitcoin ETF, becoming the first national fund in the Eurozone to publicly invest in a Bitcoin ETF, marking a historic shift in the asset allocation paradigm of mainstream institutions.

Standard Chartered Bank revealed in a research report in February 2025 that the Abu Dhabi Sovereign Fund holds approximately 4,700 bitcoins in BlackRock's spot Bitcoin ETF (IBIT), and it is expected that its allocation will further expand. The report also noted that the Czech central bank is actively considering allocating 5% of its massive foreign exchange reserves to Bitcoin, indicating that traditional reserve management institutions are increasingly accepting digital assets. If pension funds and sovereign wealth funds ultimately allocate 1%-3% to cryptocurrencies, it will bring hundreds of billions of dollars in incremental growth to the market.

In the current macro environment, the opening of the Federal Reserve's interest rate cut cycle has led to continuous pressure on U.S. Treasury yields, while the valuation of the S&P 500 index is approaching a twenty-year high, presenting significant yield challenges for traditional asset allocation. In the face of this structural shift, achieving a long-term return target of 7%-8% for 401(k) pensions has upgraded the inclusion of cryptocurrency in asset allocation from a marginal option to a strategic necessity.

The traditional 60/40 stock-bond portfolio's return potential is increasingly narrowing, while cryptocurrency, with its unique high growth potential, offers new possibilities for enhancing overall portfolio returns. Although these assets are highly volatile, allocating 1%-3% of assets to mainstream crypto assets like Bitcoin can optimize the risk-return structure by leveraging their low correlation with traditional assets, without posing a substantial threat to the long-term stability of the portfolio. In this era of diminishing traditional sources of returns, ignoring high-growth assets like cryptocurrencies may instead become the main risk limiting the achievement of long-term return goals.