Elvis sang about a blue Christmas, but cryptocurrency investors are beating the holiday rush.
The crypto sector has been reeling from the stunning collapse of the FTX cryptocurrency exchange.
Founder Sam Bankman-Fried was the company face of the crypto space until the company filed for Chapter 11 bankruptcy on Nov. 11 when it ran out of cash and could not meet the demands of its panicked customers who wanted to liquidate their crypto holdings.
“Markets are certainly in a spot of trouble right now,” Martin Hiesboeck, head of blockchain and crypto research at Uphold. “Thanksgiving historically meant a bullish phase for Bitcoin. However, there is a lot of uncertainty after the FTX collapse and a possible genesis bankruptcy–which could mean investors risk more losses this time around.”
“For those of us involved in the markets, there will be no way around the topic of the unscrupulous FTX event and its consequences over Thanksgiving, with discussions this year possibly tainted by bearish gravitas,” Hiesboeck said.
“However,” he added, “it’s not all bad news–those in the know have realized long ago the bear markets are the best time to build projects and start a portfolio that may offer good returns in the long run. Such conversations may impact how people go back to the market on Friday.”
New York Attorney General Letitia James cited the FTX fiasco and other crypto catastrophes recently when she urged Congress to adopt legislation that would prohibit investing retirement funds in cryptocurrencies, digital coins, digital tokens, and other digital assets.
She also called for the rejection of the Retirement Savings Modernization Act and the Financial Freedom Act of 2022, which would prevent the Secretary of Labor from prohibiting investment in digital assets. No action has been taken on that proposed legislation and it was sent back to the Senate’s Committee on Health, Education, Labor, and Pensions.
“Investing Americans’ hard-earned retirement funds in crashing cryptocurrencies could wipe away a lifetime’s worth of hard work,” James said in a Nov. 22 statement. “Over and over again, we have seen the dangers and pitfalls of cryptocurrencies and the wild swings in these funds.”
The Retirement Savings Modernization Act was introduced in September by Senators Pat Toomey (R-Pa.) and Tim Scott (R-S.C.) and U.S. Representatives Peter Meijer. Sen. Tommy Tuberville (R-Ala.) introduced the Financial Freedom Act in May.
Scott said in a statement that the legislation “will provide the millions of American savers invested in defined contribution plans with the option to enhance their retirement savings through access to the same wide range of alternative assets currently available to savers with defined benefit pension plans.”
‘No Intrinsic Value’
“Hardworking Americans should not have to worry about their retirement savings being wiped out due to risky bets on unstable assets like cryptocurrencies,” said James, who is also suing former President Donald Trump and the Trump Organization.
James warned that cryptocurrency prices “swing wildly because they are purely speculative rather than an investment in future cash flow.”
“Although cryptocurrencies have become popular over the past decade, they have no intrinsic value on which their prices are based,” she said.
In her letter, James described how, “tellingly, Mr. Bankman-Fried once described parts of the crypto industry in much the same way one would describe an ordinary Ponzi scheme.”
“He described it as building a box that ‘does literally nothing . . . This box is worth zero obviously. . . . But on the other hand, if everyone kind of now thinks that this box token is worth about a billion dollar market cap, that’s what people are pricing it at,’ ” James’ letter said.
James said many cryptocurrencies reached significant lows following the crash of “so-called stable coin,” TerraUSD in May, which resulted in $500 billion in losses into the broader crypto market.
James added that IRAs and defined contribution retirement plans “are key investment vehicles for working people who choose to forgo income now to fund their retirement later.”
‘Too Far of an Overstep’?
“For a substantial number of New Yorkers–indeed many Americans–the lion’s share of their retirement savings will come from these plans,” she said.
One person on Twitter thanked James “for urging Congress to prevent retirement funds from investing in cryptocurrencies that could wipe out the life savings of millions of Americans.”
“Not unless, and until, there are strong Federal laws in place to protect all Americans,” the tweet said. “For now, it’s *way too risky*.”
Other tweets were a bit more combative.
“So…the government, which is TRILLIONS in debt, is going to start controlling our retirement funds because you ‘know what to do with it”!?!?!?” one person tweeted. “That’s too far of an overstep, and I typically side with the left.”
“People should decide what to do with their money,” another tweet read. “There shouldn’t be a situation where you decide for them. People know what’s best for them, and politicians don’t know what’s best for each individual person.”
James is one of several states attorney general who are going after Nexo Group, parent to crypto lender Nexo, for allegedly offering interest-earning accounts to customers through unregistered securities.
In addition, James also brought investigations into, and civil actions against, several crypto companies, including Coinseed, Inc., Bitfinex and Tether, GTV Media Group, Inc., and BlockFi.