Cryptocurrency is in the news. Recently, a large crypto exchange failed causing considerable concern in the investment community about the safety of investing in cryptocurrency. Lack of regulation certainly does mean more freedom, but it also increases risk.
The Federal Reserve, as well as the United States Treasury, are clamoring for some regulation of these industries to avoid the kind of mess that we’ve seen in the last two weeks. We believe regulation is coming.
There is very little transparency regarding why assets in the crypto space rise and fall. At DWM we invest in assets that allow us to understand how price movements occur. We believe it is appropriate not to subject portfolios to this type of volatility and unknowns.
A recent CNN article outlined what is currently happening in the crypto market. I’m sure you’ve already read much information regarding this news headline, but it’s provided for you below to give you a brief catch-up of what has happened (and what the consequences of this exchange collapse means for investors).
“Prices of digital currencies fell again as the crisis engulfing the market deepened over the weekend. Bitcoin, the world's biggest cryptocurrency, has plummeted about 65% so far this year. It was trading at about $16,500 on Monday, according to CoinDesk. Analysts believe that it could fall below $10,000.
Ether, the world's second most valuable cryptocurrency, isn't faring much better. It was trading at about $1,230 on Monday, having sunk over 20% over the last week, CoinDesk data showed.
The plunge comes as investors continue to grapple with the stunning implosion of FTX, one of the biggest and most powerful players in the industry.
Some industry insiders have said the company's downfall had triggered a "Lehman moment," referring to the 2008 collapse of the investment bank that sent shockwaves around the world.
The episode has not just destroyed confidence in the crypto industry, but will also embolden global regulators to tighten the screws. Some of the biggest names in the business said they will welcome the scrutiny, if it helps restore faith in the industry.”
DWM does not currently hold cryptocurrencies as part of DWM managed portfolio strategies.