2022 was a reckoning for the crypto industry. Cryptocurrencies that were previously believed to be stable collapsed, while proof of overly risky, shady, and even fraudulent practices emerged among some of the most established crypto companies. Rather than getting into the weeds of what the technology of crypto is or the genesis behind its creation, it is more important to understand what is happening in the industry as it relates to your retirement and investment opportunities.
Crypto – A Promising but Immature Industry
Whether you’ve heard of the recent fiasco in the cryptocurrency markets, have been following the crypto industry closely, or are new to the space, it’s important to understand how this once booming industry and once lucrative investment option is now crumbling[1]. When inflation hit, interest rates started to rise and investments fled from riskier assets and industries, most notably, the crypto industry. This not only led to the prices of cryptocurrencies and assets declining significantly but also to illiquidity within the industry itself. A case of overconfidence in their own products led crypto giants such as FTX and Terra Luna to over-leverage their assets in unique ways, ultimately putting them in a failing position when capital fled the markets.
The moral of the story is that crypto is not invincible, and is still young, quite literally, as many company leaders are under the age of 30. These company leaders don’t operate their companies as pragmatic, experienced professionals such as in the case of Sam Bankman-Fried of FTX who was, at best, a little too “creative” in the financial structure of FTX and the associated hedge fund that managed much of the company’s assets.
Crypto as an Investment
When it comes to your retirement, you may have seen commercials for crypto brokerages, exchanges, or crypto-related companies as it becomes a more mainstream financial concept. You may have also seen ways to participate in Bitcoin or other cryptocurrencies and even purchase them as part of your investment portfolio. The reason for purchasing these assets vary widely, whether you’ve heard the term “digital gold” or “moonshot” to indicate an explosively successful investment.
However, as a long-term investment, the truth is that there is no guarantee of safety or returns, especially with a new asset and industry that is still figuring out its own ecosystem and regulation is yet to be solidified. If you have questions about crypto or want to know about other investments that are out there that can achieve your goals, call us today.
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