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Worried about inflation’s impact on your retirement savings? Invest in cryptocurrency

The global economy is tumbling, but we might be able to find some hope in cryptocurrencies.
Around the world, personal financial stress…

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1 year ago

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The global economy is tumbling, but we might be able to find some hope in cryptocurrencies.

Around the world, personal financial stress is peaking. A recent study in America found that more than three in four people feel anxious about their financial situation. This is seeding anti-risk mentalities and prompting fears around the safety of long-term savings, including retirement funds. 

However, that shouldn’t mean hiding money under the floorboards. Nor should it necessarily mean handing over the reins to a low-growth pension fund, which at current rates of inflation, are likely to be losing value. It means being smarter about assessing all options and diversifying. And that requires freedom.

That’s what Alabama Sen. Tommy Tuberville (R)  was advocating when he proposed the Financial Freedom Act in May, which would permit all Americans with self-directed retirement plans to add cryptocurrency to their 401(k)s — a defined-contribution, personal pension account. It was prompted by a piece of regulatory guidance from the U.S. Department of Labor in March attempting to bar 401(k) accounts from investing in crypto.

Too often, freedom is seen as the enemy of stability, when in fact fear is the enemy of stability. And that’s exactly what the U.S. government’s caginess around alternative assets is stirring up. Much of the media has also been quick to jump on the anti-crypto bandwagon. A quick Google search of the coverage of Fidelity’s announcement that they would soon let participants invest as much as 20 percent of their employer-sponsored 401(k) retirement plan in Bitcoin reveals overwhelming negativity, or at least scepticism.

To compound perceptions, many have been further put off incorporating rockstar assets like cryptocurrencies into their pension portfolios following May’s collapse of the Terra ecosystem. Most people just want to have the option to retire comfortably — they’re not planning on buying a yacht or a seat on Elon Musk’s Starship — and they're worried that digital assets won’t provide the stability and steady interest they need to build a solid retirement nest egg.

Age does not always equal wisdom

While caution in the crypto space is always advised, completely steering people away from considering digital assets in their retirement portfolio is itself dangerous. It’s discouraging people from accessing what could be the solution to a dying system and pension-eroding inflation.

Because, the truth is, the old ways aren’t a safe bet, either. Traditional pension funds are struggling. All but 12 of America’s 100 largest 401(k) funds have posted double-digit losses so far this year thanks to surging inflation and a turbulent U.S. stock market. At the same time, inflation chips away at purchasing power of cash while interest rates remain eye-wateringly low.

Even the property market is not a “sure thing.” Many are speculating on a housing bubble for reasons that include Chinese property giant Evergrande edging toward default. Property ownership is increasingly seen as a pipedream for younger generations.

Related: Retire early with crypto? Playing with FIRE

It thus becomes clear that clinging purely to the old ways — including traditional financial instruments and an outdated banking system — is not viable for people who want future-proof retirement savings.

Cryptocurrencies are becoming an opportunity for retirement planning

As inflation approaches a 40-year high in the U.S., it is no longer “transitory.” Instability is also becoming a semi-permanent fixture in light of climate change and the global turmoil surrounding Russia’s invasion of Ukraine. It’s hard for anyone to know what the future holds, including pension funds, so people should be free to place their bets where they see fit, including in their own retirement plans.

Stablecoins, for example, can be a prudent addition to a 401(k). It’s just about picking the right kind — one that can store wealth and hedge against the damaging effects of inflation. As an algorithmic stablecoin, Terra was innately vulnerable to speculative attacks thanks to a lack of independent asset backing. Stablecoins backed by physical assets, such as gold, on the other hand, hold enormous potential as vehicles for wealth preservation.

Gold has time and again weathered economic crises far better than stocks, bonds and fiat currencies. In 2021, for example, as the pandemic saw fiat currencies around the world turn volatile, the price of gold sat steadily between $1,700 and $1,950 an ounce, proving both its stability and value.

Taking a wider view, gold has increased in value by more than 500 percent in the years since the gold standard was abolished, with central banks making sure that their reserves remain abundant. But it is only now that gold is digitized and infinitely more accessible, making it easier to buy in fractional amounts and to transact with it. Economist Danielle Di Martino has even noted that gold, historically, is the least correlated asset class in existence with inflation. More than simply offsetting its effects, gold has maintained a positive correlation with rising inflation rates, and achieved an average yearly performance of +10.6 percent over the last 50 years. Gold has performed well in times of high volatility, in bear markets, and even outperformed stock markets at times.

Governments have a role to play in encouraging our economic salvation

Let’s face it. Retirement is a daunting prospect, even more so as it becomes more difficult to find growth in the economic environment, as well as protection and liquidity. Americans looking down the line toward an increasingly distant eventuality are right to think conservative. But they have to think conservative in a way that embraces the future.

Investing in digital gold is the ultimate “future conservative” move, combining the best of both worlds: the historic backing of traditional currencies, and the flexibility and autonomy of decentralised, blockchain-based digital currencies.

Governments need to recognize the potential of these assets and, instead of limiting investor options or scaring them into an anti-change mentality, they should provide cross-border oversight and promote increased transparency, empowering investors to achieve financial freedom by providing a context of safety.

The global economy is evolving toward alternative assets. Retirement wealth cannot be an exception to that. Individuals simply can’t afford to exclude alternative assets from their retirement plans, particularly with inflation already lapping at their hard-earned savings. It’s time for everyone to take control of their wealth and look to better, safer, and fairer alternatives to the status quo.

The opinions expressed are the author’s alone and do not necessarily reflect the views of Cointelegraph. This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice.

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VanEck to donate 10% of profits from Ether ETF to core developers

The Protocol Guild, a team of over 150 Ethereum core developers, will be the beneficiary. VanEck argues that asset managers should give back some Ether…

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October 1, 2023

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The Protocol Guild, a team of over 150 Ethereum core developers, will be the beneficiary. VanEck argues that asset managers should give back some Ether ETF proceeds to the community.

Global asset manager VanEck will donate 10% of all profits from its upcoming Ether futures exchange-traded fund (ETF) to Ethereum core developers for 10 years, the company announced on X (formerly Twitter) on Sept. 29. 

The beneficiary will be the Protocol Guild, a group of over 150 developers maintaining Ethereum’s core technology. According to VanEck, it’s only fair for asset managers to return part of their proceeds to the community building the crypto protocol. It stated:

“If TradFi stands to gain from the efforts of Ethereum’s core contributors, it makes sense that we also give back to their work. We urge other asset managers/ETF issuers to consider also giving back in the same way.“

With this move, VanEck joins other crypto-native communities supporting the Ethereum network, including Lido Finance, Uniswap, Arbitrum, Optimism, ENS Domains, MolochDAO and Nouns DAO.

According to a public dashboard tracking donations sent to the Guild’s mainnet, 4,846 contributions have generated over $12 million in donations. Funds are then distributed among its members according to a weighted ratio based on their contribution periods.

The network core developers are reportedly working on Ethereum Improvement Proposal EIP-4844 (Proto-Danksharding). The upgrade will introduce a new kind of transaction type to Ethereum, promising to reduce transaction fees for layer-2 protocols.

VanEck disclosed its upcoming Ethereum Strategy ETF on Sept. 28, saying it will invest in Ether futures contracts. The fund will be actively managed by Greg Krenzer, head of active trading at VanEck, and is expected to be listed on the Chicago Board Options Exchange in the coming days.

Other traditional investment firms set to offer exposure to Ether futures include Valkyrie and Bitwise, while the line for a spot Ether ETF keeps growing with Invesco Galaxy, ARK 21Shares and VanEck waiting for regulatory approval. The United States Securities and Exchange Commission (SEC) recently delayed a decision on whether to approve a spot Ether product until December.

Magazine: Joe Lubin — The truth about ETH founders split and ‘Crypto Google’

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FTX exploiter moved over $17M in ETH in the last 24 hours

A significant portion of the 7,749 ETH, worth roughly $13 million, was directed toward the THORChain router and Railgun contract.
According…

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October 1, 2023

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A significant portion of the 7,749 ETH, worth roughly $13 million, was directed toward the THORChain router and Railgun contract.

According to recent information from Spot On Chain, an address linked to the FTX exploit identified as 0x3e9, has conducted transfers exceeding 10,000 Ether (ETH), worth roughly $17 million, across five different addresses since Sept. 30. The addresses had remained inactive for several months before the recent activity.

Within these transactions, a significant portion of 7,749 ETH, equivalent to $13 million, was directed toward the Thorchain router and Railgun contract. Furthermore, the exploiter engaged in a swap involving 2,500 ETH, valued at $4.19 million, converting it into 153.4 tBTC at an average rate of $27,281 per token. This address, which has recently become active, has exhibited noteworthy activity and is anticipated to continue transferring ETH, most likely to Thorchain.

At the time of the initial hack on Saturday, Sept. 30, the approximate losses amounted to nearly 50,000 ETH. This incident occurred just a short while before SBF's criminal trial scheduled for Oct. 2023.

Nevertheless, these occurrences have generated a significant amount of downward pressure on the ETH price, which currently maintains a level slightly above $1,650. This situation arises as the market anticipates the introduction of Ethereum futures ETFs on Monday, Oct. 2.

FTX co-founder Sam Bankman-Fried, commonly known as SBF, is scheduled to go to trial in October. This comes after his arrest in The Bahamas and subsequent extradition to the United States, marking several months since these events occurred.

The trial is expected to last for six weeks, beginning with the selection of the jury on Oct. 3, followed by the initial court proceedings on Oct. 4. Bankman-Fried faces a total of seven charges connected to fraudulent activities, comprising two substantive charges and five conspiracy charges.

Related: Valkyrie backtracks on Ether futures contract purchases until ETF launch

During the legal proceedings, the FTX founder has consistently pleaded not guilty to all allegations. Despite numerous attempts to secure temporary release, Bankman-Fried continues to be held in custody at the Metropolitan Detention Center. His most recent request for release was denied by Judge Lewis Kaplan, citing concerns about the possibility of him fleeing.

Magazine: Can you trust crypto exchanges after the collapse of FTX?

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SEC initiates legal action against FTX’s auditor

The SEC alleges that Prager Metis, an accounting firm engaged by bankrupt crypto exchange FTX in 2021, committed hundreds of violations related to auditor…

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October 1, 2023

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The SEC alleges that Prager Metis, an accounting firm engaged by bankrupt crypto exchange FTX in 2021, committed hundreds of violations related to auditor independence.

The United States Securities and Exchange Commission (SEC) has commenced legal proceedings against an accounting firm that had provided services to cryptocurrency exchange FTX before its bankruptcy declaration.

According to a Sept. 29 statement, the SEC alleged that accounting firm Prager Metis provided auditing services to its clients without maintaining the necessary independence as it continued to offer accounting services. This practice is prohibited under the auditor independence framework.

Extract from the SEC's September 29 statement. Source: SEC

To prevent conflicts of interest, accounting and audit tasks must be kept clearly separate. However, the SEC claims that these entwined activities spanned over a period of approximately three years:

“As alleged in our complaint, over a period of nearly three years, Prager’s audits, reviews, and exams fell short of these fundamental principles. Our complaint is an important reminder that auditor independence is crucial to investor protection.”

While the statement doesn't explicitly mention FTX or any other clients, it does emphasize that there were allegedly "hundreds" of auditor independence violations throughout the three-year period.

Furthermore, a previous court filing pointed out that the FTX Group engaged Metis to audit FTX US and FTX at some point in 2021. Subsequently, FTX declared bankruptcy in November 2022. 

The filing alleged that since former FTX CEO Sam Bankman-Fried publicly announced previous FTX audit results, Metis should have recognized that its work would be used by FTX to bolster public trust.

Related: FTX founder’s plea for temporary release should be denied, prosecution says

Concerns were previously reported about the material presented in FTX audit reports.

On Jan. 25, current FTX CEO John J. Ray III told a bankruptcy court that he had “substantial concerns as to the information presented in these audited financial statements.”

Furthermore, Senators Elizabeth Warren and Ron Wyden raised concerns about Prager Metis' impartiality. They argued that it functioned as an advocate for the crypto industry.

Meanwhile, a law firm that provided services to FTX has come under scrutiny in recent times.

In a Sept. 21 court filing, plaintiffs allege that U.S. based law firm, Fenwick & West, should be held partially liable for FTX's collapse because it reportedly exceeded the norm when it came to its service offerings to the exchange.

However, Fenwick & West asserts that it cannot be held accountable for a client's misconduct as long as its actions remain within the bounds of the client's representation.

Magazine: Blockchain detectives: Mt. Gox collapse saw birth of Chainalysis

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