The U.S. Securities and Exchange Commission (SEC) has revived its warnings against fear of missing out (FOMO) cryptocurrency investing, cautioning investors about the risks of volatility and influence of celebrities on digital assets.
The renewed emphasis comes just ahead of the SEC to approve or deny several spot Bitcoin exchange-traded funds (ETFs) that are currently awaiting a decision.
- The SEC has renewed warnings about FOMO crypto investing as the deadline approaches for a decision on spot Bitcoin ETFs
- The warning cautions against making investment decisions based solely on recommendations from celebrities/influencers promoting crypto
- The SEC has fined celebrities like Kim Kardashian in the past for touting crypto assets without disclosing payments
- The warning highlights the potential volatility of assets heavily influenced by trends that can lead to quick losses
- Speculation exists that the renewed warning could signal the SEC’s looming approval of Bitcoin spot ETFs
The SEC’s Office of Investor Education and Advocacy posted a reminder on social media this week about the risks associated with investments in areas like meme stocks, cryptocurrencies, and NFTs.
While the “Say No to FOMO” sentiment is not new for the agency, having first appeared in January 2021, its timing has sparked heavy speculation. With crypto investors and companies anxiously awaiting news on the Bitcoin ETF front, some believe it could signal how the SEC plans to rule on those filings.
#SECInvestingResolution 5: Say “NO GO to FOMO” (fear of missing out). Just because others might buy a particular investment, doesn’t mean it’s the right opportunity for you. Learn more about finding out what’s right for you and your investing goals: https://t.co/fixDWoNFrF pic.twitter.com/SGf1z6xmhL
— SEC Investor Ed (@SEC_Investor_Ed) January 6, 2024
The warning cautions retail investors about the dangers of choosing investments based solely on the recommendations of celebrities and star athletes without doing further research.
“You may see your favorite athlete, entertainer or social media influencer promoting these kinds of investment opportunities,” it states. “Although it’s tempting, never decide to invest based solely on their recommendation.”
The SEC has come down hard on celebrity promotions in the past, including fining Kim Kardashian $1.26 million in 2022 for touting EthereumMax tokens on Instagram without disclosing her $250,000 payment.
The alert also attempts to brace less experienced investors for the innate volatility of trend-driven assets that can lead to extreme price swings. “How would you feel if your investment lost 20, 30, or even 50 percent in a single day?” it asks. While tempting at first, chasing major gains can quickly turn into major losses if timed poorly.
The renewed warning serves as part of the SEC’s broader educational push around crypto’s risks. But coming right now, it also telegraphs the challenging balancing act regulators face between encouraging financial innovation and protecting investors.
The imminent Bitcoin ETF decisions will have an outsized impact on market prices and perceptions. Just as the crypto community dissects the timing and messaging, so too will they react strongly to the pending ETF rejections or approvals.