Britain’s financial watchdog issued a stern warning to cryptocurrency traders on Monday when Bitcoin took investors on another wild ride.
According to the UK’s Financial Conduct Authority, consumers investing in the fierce cryptocurrency market must be “willing to lose all their money” because there are so many risks.
Businesses that promote cryptocurrencies may exaggerate the returns that traders will reap and underestimate the risks of the market, and investors who buy in are unlikely to have access to consumer protection if something goes wrong, regulators said.
“Consumers should be aware of the risks and should fully consider whether investing in high-yield investments based on cryptocurrencies is right for them,” the agency, known as the FCA, said in the warning. “They need to investigate and thoroughly consider the crypto business 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 wildly.
Monday offered another example of volatility as the price of Bitcoin – the world’s largest cryptocurrency – fell after a record run last week.
Bitcoin traded at $ 33,554.28 at 9:51 a.m., down nearly 15 percent from a day earlier and about 20 percent from the daily high of $ 41,962.36 it reached on 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 by about 28 cents.
Institutional investors have been helping to raise the price of Bitcoin over the past few weeks, amid the growing perception that it provides protection against inflation and may even become an alternative to gold.
But the FCA generally gives cryptocurrencies as risky, ‘speculative’ investments that can empty retailers’ pockets, given how loosely regulated they are.
“Investing in cryptocurrencies, or investments and loans associated with them, generally involves very large risks with investors’ money,” the agency warned. “… As with all high-risk speculative investments, consumers need to make sure they understand what they are investing in, the risks involved in investing and any regulatory protection that applies.”