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SEC Reignites Crypto Caution: Fresh ‘FOMO’ Alert as Hopes for Spot Bitcoin ETFs Surge

Last Updated January 8, 2024 10:07 AM
Teuta Franjkovic
Last Updated January 8, 2024 10:07 AM

Key Takeaways

  • The SEC is reiterating caution on FOMO-driven crypto investing.
  • It is emphasizing the risks of celebrity endorsements.
  • Anticipation has been building for Bitcoin ETF approval.

Just days before the expected approval of spot Bitcoin exchange-traded funds, the United States Securities and Exchange Commission (SEC) has reiterated its caution to investors about the risks of FOMO-driven investing  in the crypto space.

The warning emphasizes the speculative and volatile nature of investments in the crypto market. It is particularly aimed at individual investors who are involved in crypto transactions.

‘Say NO to FOMO’

In a recent tweet , the SEC’s Office of Investor Education highlighted the potential dangers involved with digital assets. This warning encompasses a range of investments. These include meme stocks, cryptocurrencies, and non-fungible tokens (NFTs). It aims to educate retail investors about the volatility and uncertainty inherent in these markets.

The “Say no to FOMO” blog post by the United States Securities and Exchange Commission (SEC) first emerged on January 23, 2021, during a robust bull market in both crypto and equities. This period witnessed Bitcoin, Ether (ETH), and numerous other altcoins soaring to record-breaking highs by November 2021. The SEC issued this cautionary message again around March 2022 , a time when the markets were beginning to show signs of cooling down.

Cautions Against Celeb Endorsements as Bitcoin ETF Approval Looms

On social media, several users have speculated  that the recent warning from the SEC might indicate an impending approval of spot Bitcoin ETFs. This speculation comes with the SEC expected to make a decision before a January 10 deadline.

In its warning, the SEC specifically mentioned the involvement of celebrities and athletes in promoting various crypto assets. The agency cautioned investors against making financial decisions based solely on endorsements by these popular figures.

The warning aims to remind investors to exercise due diligence and consider the inherent risks, rather than being influenced by celebrities who might be touting investment opportunities in the crypto space.

It said: “You may see your favorite athlete, entertainer or social media influencer promoting these kinds of investment opportunities. Although it’s tempting, never decide to invest based solely on their recommendation.”

In recent years, the SEC has taken action against celebrities involved in the promotion of certain cryptocurrencies. A notable instance occurred on October 3 2022 when Kim Kardashian agreed to a settlement of $1.26 million with the SEC.

This settlement followed charges against the reality TV star  for not disclosing a payment of $250,000 for promoting Ethereum Max (EMAX) to her 360 million Instagram followers.

Crypto Market Volatility Leads to Rapid Financial Losses, Claims SEC

The report from the SEC also highlighted the volatility of assets that are significantly influenced by trends and influencers. It cautioned investors about the allure of such assets. The report noted that, while they might seem attractive initially, they often lead to rapid financial losses as market dynamics shift.

The report posed a question to its readers: “How would you feel if your investment lost 20%, 30%, or even 50% in a single day?”

Currently, there is a keen sense of anticipation in the crypto industry regarding Bitcoin ETFs. Eric Balchunas, a senior ETF analyst at Bloomberg, suggested  most Bitcoin ETF applicants coud receive approval within the week.

This prediction particularly applies to those who fulfilled the SEC’s requirements by December 29. This indicates a potentially significant development in the cryptocurrency investment landscape.

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