Crypto winter has increased insolvency and risk. But advisors can still lend a helping hand...
Defining crypto, digital assets and the future of finance Was this newsletter forwarded to you? Sign up here. |
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Welcome to Crypto for Advisors! In this week's newsletter: As the chill of crypto winter continues to set in, the dominoes have continued to fall. The latest is the fall of crypto broker Voyager Digital, which recently halted all transactions on its platform, then subsequently filed for bankruptcy protection – all in one week. The news follows similar insolvency issues at crypto hedge fund Three Arrows Capital and fellow lender Celsius Network. All the bad headlines are enough to sear any curious onlooker who may have been considering investing in crypto, while those already in are wondering when the pain will stop. Financial advisors who were getting inundated with queries about crypto just a few months ago are now faced with a whole new set of questions. Contributor Christopher Robbins has some solid advice for how FAs can approach the current environment, a return to fundamentals that eschews absolutism and overreaction, and keeps one eye on the inevitable spring. Until then, be sure to keep the other eye on those dominoes, and the best way to do that is via CoinDesk's newsletters. If you haven't already, you might want to subscribe to our News and Markets newsletters. You can check them out here. – Pete Pachal, chief of staff, content Did someone forward you this newsletter? Subscribe below. |
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Crypto Winter Has Arrived. Here's How Advisors Can Help |
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Shutterstock Images A chill has descended on the world of crypto – are you ready? Winter in New York's North Country is cold. So cold that the dim January sun and howling winds along the St. Lawrence River can leave wind chills well below freezing for an entire month or more, even in an era of warming global climates. In such conditions, winter weather gear wasn't optional like it is now in many parts of the U.S. – children don't forget their hats and gloves, and waterproof boots and wool socks are necessities to avoid potential loss of limbs due to frostbite. Those lessons should serve me well as "crypto winter" descends upon us. Not only are asset prices well down from their highs across almost all of the crypto ecosystem, but we're starting to see dominos fall in projects and companies failing. Let's look at a few of those names and four ways advisors can help... – Christopher Robbins |
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mana5280/Unsplash CoinDesk surveyed some survivors of the last bear market for advice on what to do – and not to do – during crypto downturns.
Cryptocurrency prices have plummeted, some crypto projects have gone bust, many companies are struggling and have stopped hiring, and the usual "crypto is dead" headlines are hitting the mainstream media. Things aren't looking good.
But those who have been in crypto for a while have seen it all before. Crypto's extremely cyclical, characterized by bear and bull markets. In bull markets, like the one that started in late 2020 and ended in late 2021, prices can rise by double digits on a daily basis.
During those times, it feels as if the market is destined to go only up. But in a bear market, prices may fall 90%, followed by another 90% and so on.
Although the previous crypto bear markets coincided with bullish sentiments in equities, now crypto is tightly correlated to a macro environment with a recession potentially on the horizon.
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New guidance from the New York Department of Financial Services should shake up how stablecoin issuers do attestation, argues our columnist. The digital asset, often called digital gold, soared as governments printed money and crashed as they tightened. Poor macroeconomic sentiment, fears of inflation and systemic risks from the crypto market pushed the cryptocurrency below 2017's highs. Alpha in DeFi is about to get a lot scarcer (although still super attractive). Luckily, risk management will eventually get much simpler. |
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Disclaimer: The information contained in this newsletter, and any information linked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. You should seek additional information regarding the merits and risks of investing in any cryptocurrency or digital assets. |
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