For those who underestimated the risks of investing in cryptocurrency until recently, the collapse of the crypto exchange FTX in late 2023 and its domino effect on other firms was a wake-up call.
The leverage and solvency quagmire associated with Alameda Research, the trading arm of FTX, led to its bankruptcy and the arrest of CEO Sam Bankman-Fried. Worse, the whole string of events has led to a loss of billions in the cryptocurrency market.
Cryptocurrencies as a whole, and Bitcoin (BTC) and Ethereum (ETH) in particular, have seen a resurgence in the first part of 2023, with the crypto verse’s market capitalization reaching over $1 trillion. This has prompted some to speculate that the crypto winter is over. However, many financial advisors are still recommending that investors use caution and keep these investments limited to a small portion of their portfolios.
Cryptocurrencies are a high-risk investment and should only be bought by those who can afford to lose their entire investment, according to the Certified Financial Planner Board of Standards.
The recent fraud charges and accusations of mismanagement among some of the crypto world’s top names have demonstrated that the alarms sounded by regulators such as the Financial Industry Regulatory Authority, or FINRA, and consumer protection agencies – Consumer Federation of America, for example – are well founded.
Cryptocurrencies are a high-risk investment and should only be bought by those who can afford to lose their entire investment, according to the Certified Financial Planner Board of Standards. The recent fraud charges and accusations of mismanagement among some of the crypto world’s top names have been demonstrated.
In addition, traditional valuation methodologies are hard to apply to crypto assets, the regulatory framework has been uncertain, and some providers have operated outside whatever framework has been established.
These risks might not be enough for many investors to close the door to cryptocurrencies. However, the CFP Board recommends that investors embrace certain risk management strategies if they wish to continue investing in crypto.
One such risk management strategy is to diversify your investment. Another is to only invest money you can afford to lose. Finally, be sure to do your own research before investing in crypto.
I am Andy Sonal,, We are a team of knowledgeable individuals who collaborate with you on the most recent news and information on the cryptocurrency and bitcoin industries. Our aim is to inform and educate our readers on the ins and outs of this dynamic sector.