Back in January, the U.S. Securities and Exchange Commission made a landmark decision regarding crypto. In a statement from Chair Gary Gensler, he announced the approval of 11 spot bitcoin ETFs offered by companies such as BlackRock, Fidelity, Invesco, Ark Investments, etc. This represents the first legitimate intermingling of legit financial investments with the Wild Wild West of cryptocurrency.

“Spot” means that the fund can directly buy, hold, and trade digital assets. Previously, if someone really wanted to make Bitcoin a part of their nest egg, the only available products were a handful of ETFs that dealt in Bitcoin futures – contracts to buy and sell at an agreed-upon price rather than owning the crypto outright.

Since their lowest point back in 2022, the price of Bitcoin and several other popular cryptos have doubled – which means investors once again are suffering from FOMO (fear of missing out). While SEC-approved ETFs are certainly better than anything else on the market, I STRONGLY caution against chasing after high gains for the following reasons.

• Extreme volatility. You don’t have to know much about crypto to know that prices can be highly unstable. Even the granddaddy Bitcoin has had more than its fair share of daily changes in the 5 to 10% range.
• Lack of regulation. While the major financial institutions may need to follow strict guidelines for how they manage and report the fund, the asset itself doesn’t. No one regulates Bitcoin, and it’s doubtful anyone ever will. Therefore, you’d be wise to be highly skeptical of the very “thing” these funds are based upon.
• Overshadowed by fraud. When the CEOs of two of the biggest crypto exchanges FTX and Binance (Sam Bankman-Fried and Changpeng Zhao) fell from grace, it’s impossible not to ignore how much shady activity has gone on and probably continues to do so. There was a Forbes analysis of 157 crypto exchanges that found that as much as 51% of the daily Bitcoin trading volume was most likely bogus – nothing more than wash trading used to swing the price of Bitcoin one way or the other. I know for myself that’s not exactly the kind of thing I want my retirement egg hinged upon.

Perhaps the most concerning and intriguing part of the SEC Bitcoin ETF approval was the last paragraph of their statement which read: 

“We did not approve or endorse Bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”

I think the candid words of Dennis Kelleher, the CEO of investor advocacy think tank Better Markets, sums it up better: 

“The SEC’s action today has changed nothing about this worthless financial product: Bitcoin and crypto still have no legitimate use.”

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