Beware Of Crypto FOMO, Warns The SEC

Last updated Jan 16, 2024 | 10:41 AM UTC

Buzz surrounding the approval of a Bitcoin Spot Exchange Traded Fund (ETF) is reaching a fever pitch, prompting the US Securities and Exchange Commission (SEC) to once again warn investors to beware of FOMO-driven crypto in a 6 January 2024 tweet.

Buyers beware

In the post entitled ‘Say “NO GO to FOMO”’, SEC director Lori Schock has urged investors to take extra precautions and avoid succumbing to the hype surrounding cryptocurrencies.

More specifically, the post highlights that digital assets, non-fungible tokens (NFTs) and other tokens issued through initial coin offerings (ICOs) do not behave as regular stocks do, and just because there is significant hype around the topic on the Internet, does not mean it’s a sound investment. 

The post writes: “You may see your favorite athlete, entertainer or social media influencer promoting these kinds of investment opportunities. Although it’s tempting, never make a decision to invest based solely on their recommendation.”

It also added: “And, just because others around you might be buying into these kinds of opportunities, it doesn’t mean you have to.”

Furthermore, the SEC placed emphasis on reminding investors that crypto markets are extremely volatile and somewhat unpredictable as they are heavily influenced by the Internet and other external factors. 

The SEC, quite fairly, asks the reader how they would feel if their investment tumbled “20, 30, or even 50 percent in a single day?”, referring to the more extreme but frequent price action found amongst altcoins, memecoins, and NFT projects. 

But it is worth noting that whilst it may not occur within a day, even the likes of BTC can slump heavily over a year, with the premier crypto falling to a low of around $15,000 in 2022 after almost reaching $70,000 the year prior.

Fool me once

The first FOMO warning came from the SEC in January 2021 when the crypto and equities markets were soaring high. In March 2022, the SEC issued another warning when global markets began to tumble significantly. This latest post marks the third major warning from the regulator.

These warnings were welcomed by a majority of the crypto community as increased awareness and protections for investors is an ongoing effort. That said, some speculated that the post could hint at a possible Bitcoin spot ETF approval this week.

Though in years gone by, this post may have been brushed off as fear, uncertainty, and doubt (FUD) from the SEC as they somewhat represent the antithesis of crypto, this post is sound knowledge to pass on to those who may be looking to get into crypto for the first time, and a firm reminder to those looking for quick riches that it is rarely ever that easy.