The United States Securities and Exchange Commission (SEC) alerted mutual fund investors about the risks in the Bitcoin futures market. The US agency even described the cryptocurrency as a “highly speculative” asset.
Don't Ignore the Risks
The price of the primary cryptocurrency skyrocketed during 2020 and continued its rally in the first months of 2021 reaching an ATH of around $65,000 in mid-April.
Consequently, many individuals and mutual fund investors took the opportunity to jump on the Bitcoin bandwagon and allocate their capital to it. However, the US SEC warned market participants to be especially careful when doing so.
The US watchdog advised that even though the digital asset has become very popular and tempting for investors, it still hides its risks as it is volatile and traded in a poorly regulated market. SEC went further calling Bitcoin a “highly speculative” instrument.
The agency reminded of its primary mission to protect investors and enable fair and efficient markets. It also alarmed that every individual willing to trade with the cryptocurrency ought to investigate thoroughly the matter and keep in mind its risky nature:
“Protecting investors and assessing the regulatory compliance of these funds is a top priority for staff.”
Additionally, the SEC plans to explore whether the crypto industry is capable of supporting ETFs. In the course of the process, agency officials intend to examine the valuation of assets by funds, analyze the liquidity of the cryptocurrency market, and determine the efficiency of risk management.
Who Else Sounds the Alarm？
The Securities and Exchange Commission is not the only regulator to warn investors of the potential hazards connected to Bitcoin trading.
The UK Financial Conduct Authority was among the first to do so earlier this year. According to the British institution, many of these companies lack regulation and promise high returns. FCA further stated that people dealing with such organizations should be prepared for worst-case scenarios, including losing all of their money.
On the other side of the globe, the New Zealand financial regulator – the FMA – shared a very similar warning. The agency advised investors of the dangers that Bitcoin trading hides and same as the FCA told people that they can lose all their money.