Britain’s financial watchdog on Monday issued a serious warning to cryptocurrency traders as Bitcoin took investors on another wild journey.
The UK Financial Conduct Authority said consumers investing in the “hot” cryptocurrency market should be prepared to lose all their money as there are many risks.
Companies that promote investments in cryptography may exaggerate the returns traders will get and underestimate market risks, and investors who buy will not have access to consumer protections if something doesn’t work, according to regulators.
“Consumers should be aware of the risks and fully consider whether it is appropriate to invest in high-yield investments based on crypto assets,” the agency, known as the FCA, said in the warning. “They should carefully check and consider the business of the cryptocurrencies involved.”
Officials also noted that there is no guarantee that digital currencies can be converted back into cash and that their prices are known to fluctuate disorderly.
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 a.m., nearly 15 percent from the previous day and about 20 percent from the all-time high of $ 41,962.36 that reached Friday, according to CoinDesk data.
Other popular currencies also suffered heavy losses: Ethereum, the second largest cryptocurrency by market value, recently fell about 20 percent to $ 1,031.48, while XRP fell about 15 percent. of 28 cents.
Institutional investors have helped raise the price of Bitcoin in recent weeks amid growing perceptions that it offers protection against inflation and could even become an alternative to gold.
But the FCA launched cryptocurrencies broadly as risky and “speculative” investments that could empty the pockets of retailers, as they are so poorly regulated.
“Investing in cryptocurrency assets or investments and loans related to them usually involves taking very high risks with investors’ money, ”the agency warned. “… As with all high-risk speculative investments, consumers should make sure they understand what they are investing in, the risks associated with the investment, and any regulatory protections that apply.”