Are new Bitcoin ETF investors protected against a sudden crypto crash?

Cathie Wood, CEO and founder of Ark Invest and one of the best ‘stockpickers’ in the world of the past few years, did an interview with Charles Schwab last week. Schwab is an American financial advisory firm. Cathie has always been a Bitcoin bull and was championing Bitcoin and crypto as she always does.

In November last year, Cathy advised everyone to stock up on Solana, which was still trading at $50. Right now Solana is trading over $200. At the beginning of January she predicted a ‘sell the news’ decline for Bitcoin.

Both predictions came true as she said they would.

Protection against crypto volatility

One very interesting question was asked during that half hour that I wanted to know the answer to. Now that boomers are also investing in Bitcoin via ETFs (exchange traded funds) from BlackRock and Fidelity, Bitcoin should be less volatile. But the price of the largest digital coin has already fallen twice by about 15% in the past two months.

So if Bitcoin were to crash again, let’s say by 50% as it did in 2018 and 2022 for example, are investors insured against those losses because they invested with a well-known Wall Street company?

Crypto investors are used to taking a beating. There is a well-known meme on social media showing the faces of some sad stock traders next to a smiling Leonardo Dicaprio (as slave trader Calvin Candie from Django). The meme states that when the stock market goes down 3%, crypto goes down 40% at the same time.

Best MEME every! This is so CT! LMFAO

Crypto traders have balls of steel and Ice in our veins. pic.twitter.com/jEBzfr4jKo

— Bleeding Crypto (@Bleeding_Crypto) June 8, 2021

Crypto traders and crypto investors are used to wild swings. But the boomers who have been investing in Bitcoin ETFs since the beginning of this year are not. As the largest digital currency was trading at $74,000 last week, they are now in panic mode because we were (temporarily) down 15% this weekend at a price of $65,000.

Bitcoin crash

Hence the question from those ‘boomers’. What happens if Bitcoin crashes? Can we then go to BlackRock and Fidelity of Ark and file a complaint because you said it was a safe investment?

Cathie Wood and Ark have apparently hedged against the possibility, because they too know the concerns of ‘boomer investors’. Their ETF prospectus clearly states that Bitcoin can still go to 0 (even if she personally thinks that is not really a possibility). Just so you know: we’re all in the same boat. I think it will go higher again in the coming days and weeks, but don’t be surprised if a flash crash of 20 or even 30% happens. That is crypto.