As more states open the gates for pensions to make sizable bets on cryptocurrencies like bitcoin, fiduciaries for public funds are pushing back on the idea, arguing that the asset class is still too speculative and volatile.
With its recent $5 million buy-in through a BlackRock ETF, Texas has become the first state to fund a “strategic bitcoin reserve:” A government-held stockpile of bitcoin similar to how other countries maintain reserves of gold or oil.
Other state legislatures have been keen to buy into bitcoin with pension funds. New Hampshire, for example, has passed a law allowing the state treasury to invest up to 5 percent of public funds into a strategic cryptocurrency reserve, but has not yet funded it. Indiana is pushing for legislation allowing certain pension funds to invest in cryptocurrency ETFs, while also requiring a number of state savings and retirement programs to offer cryptocurrency ETFs as investment options. And Ohio has introduced a slate of crypto legislation, including a bill that would allow the treasurer to invest a portion of public funds in digital assets.
Altogether, at least 40 states have introduced or have pending crypto-related legislation in 2025.
But despite the activity on the legislative level, one investment chief for a midsized city pension told Institutional Investor that they don’t know anyone in their peer group who is clamoring to add a strategic allocation to cryptocurrency to their portfolio.
“Crypto is much too volatile at this point to even be considered as an investment,” they said. While several of their board members play with crypto in their personal accounts, the pension chief said those trustees have openly compared such assets to lottery tickets. “Unless things change dramatically, we will never own crypto while I am CIO.”
State fiduciaries opposing investing state pensions in digital assets include North Carolina Treasurer Brad Briner, who recently deemed them too volatile to serve the state retirement systems’ needs. Arizona Gov. Katie Hobbs, meanwhile, vetoed a bill to invest retirement funds in bitcoin, calling it an "untested investment." And Connecticut Gov. Ned Lamont signed a law banning the state from investing in bitcoin and other virtual currencies.
Volatility and a lack of sufficient data remain major deterrents. Bitcoin has seen three years in which drawdowns were more than 60 percent, plummeting 61 percent in 2014, 73 percent in 2018, and 64 percent in 2022. And recent market turmoil only underscores the concerns of traditionally conservative allocators: Bitcoin plunged to $89,393 on Nov. 18, triggering $800 million in liquidations.
“Institutional investors are primarily asset allocators, and to allocate to a new class of assets, they’re looking for a reasonable amount, preferably a decade or two, of reliable data about volatility and correlation. And we’re very young in that cycle,” said Donald Putnam of Grail Partners.
Plus, there’s a concentration problem. Bitcoin and Ether are currently the most, if not only, mainstream cryptocurrencies out there. Beyond those two, things in the digital asset space can very quickly enter the high-risk realm of rug-pulls, casino chips, and pump-and-dumps. As the midsized city allocator told II: “To invest in two highly volatile instruments and call it an asset class is not our style. Nor is investing in less understood cryptos.”
Outsourced chief investment officers are also not ready to push for serious allocations to portfolios. Michael Rosen, chief investment officer for Angeles Investments, wrote in an email that the California-based OCIO provider has “not allocated client money to this space,” which he describes as “highly speculative.”
While proponents of crypto investing argue for digital currencies as a store of value, Rosen remains skeptical. “It’s possible they will become so in the future, but their excessive volatility means they are not there yet,” he said. “The actual use case for digital currencies, as a mechanism for actual exchange, is far from realization.”
The approval of spot Bitcoin and Ethereum ETFs and passage of the GENIUS Act have opened the door for pensions to invest in crypto. But allocations have so far been small and mostly indirect: Wisconsin and Michigan’s pension funds have invested in Bitcoin ETFs (though Wisconsin has since exited its position), while CalPERS holds public shares in Coinbase and Strategy but has no direct crypto exposure. (University endowments, meanwhile, have been big and early investors.)
