In 2022, the crypto industry was shaken by as capital fled the crypto markets as inflation emerged and the economic recession ensued. Shady and even fraudulent activities were uncovered at some of the most established companies. Cryptocurrencies that were once considered by some as somewhat stable collapsed as a result. So, what is going on in the industry as it pertains to your retirement and investment choices?
An Industry Struggling to Grow Up
Whether you’ve been keeping tabs on the cryptocurrency sector or are new to the game, it’s critical to know how this once-booming industry is now crumbling.[1]
Inflation caused interest rates to rise, which resulted in a contraction of the economy and a capital flight from riskier businesses and industries, especially the crypto industry. This not only caused the prices of cryptocurrencies and other assets to plummet but also caused illiquidity inside the industry itself. When capital fled the markets, crypto giants such as FTX and Terra Luna were put in a failing position due to their over-leveraging of their assets in unique ways, which was caused by their overconfidence in their own products and companies.
The lesson of the tale is that crypto is not infallible and that it is still young… Many crypto company CEOs approach the structure and financial order of their companies in an idealistic, “imaginative”, but overly risky way.
The State of Crypto as an Investment
Crypto has become a more widespread financial concept, and you may have seen commercials for crypto exchanges or brokerages. You may also have seen advertisements for Bitcoin or other cryptocurrencies and even purchased them as part of your investment or retirement portfolio. The reasons for purchasing these assets vary widely, whether you’ve heard terms such as ‘digital gold’ to indicate stability and intrinsic value, or ‘moonshot’ to indicate a massively speculative 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 investments that can help you work towards your goals, call us today.
