Cryptocurrency investors are learning in real time that there is no government safety net protecting them when funds disappear. Because cryptocurrency value can fluctuate wildly in an instant, it makes for rather risky investments.
While federal regulators have had an alarm bell ringing for years that investors are not protected when trading on cryptocurrency exchanges, investors are now seeing the results of investing in non-regulated exchanges.
The Wall Street Journal reports that crypto exchanges like Celsius Network LLC are freezing customers’ funds as cryptocurrency values continue to plummet. Is the crypto craze coming to an end?
Back in April, Fidelity Investments announced they are allowing 23,000 companies the option to add Bitcoin to their 401(k) menus later this year. Fidelity is the first, and largest, 401(k) provider to endorse the investment of Bitcoin. Fidelity has not commented on this plan since the latest crypto crash.
According to The Wall Street Journal, the announcement was met with serious concern from Labor Departmentofficials saying, “we have grave concerns with what Fidelity has done.” Opening the option to invest in cryptocurrencies in your 401(k) has touted controversy throughout the investment world due to the extreme volatility in the crypto market and potential regulations to come.
Just about two weeks after Fidelity’s announcement, the crypto market descended into turmoil. In the past six months, the price of Bitcoin has dropped nearly 50%.
Crypto exchanges are beginning to react to the drop in value. Coinbase, a popular crypto exchange, reduced its workforce by 1,100 employees, or about 18% of its staff, as part of its efforts to manage operating expenses in mid-June.
As investors continue to deal with rising interest rates and inflation, they are dropping riskier investments, including cryptocurrencies. Ultimately, investors should exercise caution and consult trusted financial advisors before making any decisions.