UK watchdog warns cryptocurrency traders of Bitcoin volatility

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Britain’s financial watchdog issued a disastrous warning to cryptocurrency traders on Monday as Bitcoin dragged investors into yet another wild adventure.

The UK’s Financial Conduct Authority has said that consumers investing in the hot cryptocurrency market “should be prepared to lose all their money” because there is so much risk involved.

Companies that promote crypto investments may overestimate the returns traders will reap and underestimate the risks in the market, and investors who buy are unlikely to have access to consumer protection if something goes wrong, have said regulators.

“Consumers should be aware of the risks and fully consider whether investing in high-yield investments based on cryptoassets is right for them,” the agency, known as FCA, said in the warning. “They should carefully check and review the cryptoasset activity involved.”

Visual representation of digital cryptocurrency.
Getty Images

Officials also noted that there is no guarantee that digital currencies can be converted back to cash, and their prices are known to fluctuate wildly.

Monday offered another example of this volatility as the price of Bitcoin – the world’s largest cryptocurrency – fell after a record rally last week.

Bitcoin was trading at $ 33,554.28 at 9:51 am, down almost 15% from the previous day and about 20% from the all-time high of $ 41,962.36 reached on Friday, according to data from CoinDesk.

Bitcoin
Bitcoin has been volatile lately.
Getty Images

Other popular coins also suffered heavy losses – Ethereum, the second largest cryptocurrency in terms of market value, recently fell around 20% to $ 1,031.48, while XRP was around 15% at about 28 cents.

Institutional investors have helped drive Bitcoin’s price higher in recent weeks, as the growing perception that it offers protection against inflation and may even become an alternative to gold.

But the FCA has generally called cryptocurrencies risky and “speculative” investments that could empty the pockets of retail traders given their weak regulation.

“Investing in crypto-assets, or related investments and loans, usually involves taking very high risks with investor money,” the agency warned. “… As with all high-risk speculative investments, consumers should ensure that they understand what they are investing in, the risks associated with the investment and the applicable regulatory protections.”

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