The U.S. Securities and Trade Commision (SEC) has warned buyers concerning the dangers of Bitcoin futures buying and selling — citing market volati
The U.S. Securities and Trade Commision (SEC) has warned buyers concerning the dangers of Bitcoin futures buying and selling — citing market volatility, a scarcity of regulation and fraud to call a number of points.
In a June 10 Investor Alerts bulletin, the SEC outlines key factors that buyers ought to “fastidiously think about” earlier than investing in a fund that buys or sells Bitcoin futures.
“Traders ought to perceive that Bitcoin, together with gaining publicity by means of the Bitcoin futures market, is a extremely speculative funding,” the bulletin learn.
This newest Bitcoin-related threat warning from the SEC follows up on a word it despatched out final month, warning buyers “focused on investing in a mutual fund with publicity to the Bitcoin futures market” to assume twice as a result of dangers.
The most recent warning notes that whereas investments in all kinds of funds contain threat, funds that “purchase or promote Bitcoin futures might have distinctive traits and heightened dangers in contrast” to others:
“Traders ought to think about the volatility of Bitcoin and the Bitcoin futures market, in addition to the dearth of regulation and potential for fraud or manipulation within the underlying Bitcoin market.”
The SEC additionally highlighted that Bitcoin’s worth doesn’t essentially correlate with the worth of the fund that holds Bitcoin futures positions. In accordance with the SEC, that is partially as a result of funds probably not having a direct publicity to the “underlying belongings.”
“Futures contract costs can range by supply months and differ from the underlying commodity’s spot worth,” the bulletin learn.
The bulletin additionally emphasised warnings equivalent to “buyers ought to concentrate on the extent of threat they’re taking in comparison with the extent of threat they’re comfy taking,” which sparked a humorous response on Twitter, with finance and threat researcher and writer Nassim Taleb, stating “I’m very grateful that we now have the SEC, thank God!”
I’m very grateful that we now have the SEC, thank God!
— Nassim Nifraudolas Taleb (@nnfraudtaleb) June 10, 2021
Associated: JPMorgan factors to weak Bitcoin futures as sign for bear market
The warning is the second time this week U.S. regulatory our bodies have come out publicly towards cryptocurrency derivatives. On June 8, Dan M. Berkovitz, the commissioner of the Commodity Futures Buying and selling Fee (CFTC) mentioned he believed that DeFi markets for derivatives are a “dangerous thought” and that he doesn’t see “how they’re authorized beneath the CEA.”
Caitlin Lengthy, the founder and CEO of Avanti Monetary, has been keeping track of narrative from public statements put out by U.S. governing our bodies amid what she calls a “crypto regulatory crackdown”. She identified earlier at present the SEC was probably much more alarmed about abroad platforms:
“SEC is issuing this investor warning re onshore exchanges, which supply solely about 2.5x leverage–just think about the way it views offshore exchanges providing >100x leverage.”