The Financial Conduct Authority (FCA) has issued stark warnings to investors about Bitcoin following dramatic recent price swings. On 11th January, the value of cryptocurrencies fell by $150 billion in just a single day. Three days later on 14th January, Bitcoin had already recovered much of its lost value and was again trading at high levels.
Just yesterday, BTC crashed over 12% in a single day’s trading as Joe Biden’s inauguration and stimulus promises restored confidence in the US assets. (Live price chart)
Words Of Caution From The FCA
In light of the recent swings in the value of cryptocurrencies, the FCA has warned investors that the market offers little in the way of protection for consumers.
It also cautioned that firms offering cryptocurrency investment opportunities frequently downplayed the risks involved and exaggerated the rewards.
In a strong caution, it warned that consumers who invest in cryptocurrency should be ready to lose all of their money. The FCA’s caution comes following its ban in October on the sale of crypto-derivatives to retail consumers.
Firms are no longer allowed to offer crypto CFDs, but it is still possible to trade crypto with exchanges (Coinbase) or wallet providers such as eToro as they do not provide leverage or derivatives.
Growing Use For Diversification
Despite the risks, investment into Bitcoin is being used more and more as a move to diversify portfolios.