The United States Securities and Exchange Commission (SEC) has warned investors about the risks of Bitcoin futures trading – citing market volatility, lack of regulation and fraud to name a few – a few.
In a June 10 Investor Alerts bulletin, the SEC outlines key points that investors should “carefully consider” before investing in a fund that buys or sells Bitcoin futures.
“Investors should understand that Bitcoin, including gaining exposure to the Bitcoin futures market, is a highly speculative investment,” the bulletin states.
This latest Bitcoin risk warning from the SEC follows a memo it sent out last month, warning investors “interested in investing in a mutual fund with exposure to the Bitcoin futures market” to consider twice because of the risks.
The final disclaimer notes that while investments in all types of funds come with risk, funds that “buy or sell Bitcoin futures may have unique characteristics and increased risks” compared to others:
“Investors should consider the volatility of Bitcoin and the Bitcoin futures market, as well as the lack of regulation and the potential for fraud or manipulation in the underlying Bitcoin market.”
The SEC also pointed out that the price of Bitcoin does not necessarily correlate with the value of the fund that holds Bitcoin futures positions. Part of the reason, according to the SEC, is that the funds potentially do not have direct exposure to “underlying assets.”
“Futures prices may vary by month of delivery and differ from the spot price of the underlying commodity,” the bulletin said.
The bulletin also emphasized warnings such as “investors should focus on the level of risk they are taking versus the level of risk they are comfortable taking”, which triggered a humorous response on Twitter, with finance and risk researcher and author Nassim Taleb, stating “I am very grateful that we have the SEC, thank goodness! “
I am very grateful that we have the SEC, thank goodness!
– Nassim Nifraudolas Taleb (@nnfraudtaleb) June 10, 2021
Related: JPMorgan Highlights Weak Bitcoin Futures As Sign Of Bear Market
The warning is the second time this week that U.S. regulators have spoken out publicly against cryptocurrency derivatives. On June 8, Dan M. Berkovitz, Commissioner of the Commodity Futures Trading Commission (CFTC) said he thought DeFi markets for derivatives was a “bad idea” and that he did not see “why. they are legal under the CEA. ”
Caitlin Long, founder and CEO of Avanti Financial, has been keeping tabs on accounts of public statements released by U.S. governing bodies amid what she calls a “crypto-regulatory crackdown.” It sharp earlier today, the SEC was probably even more alarmed by foreign platforms:
“The SEC is issuing this warning to investors regarding onshore exchanges, which only offer about 2.5 times leverage. Just imagine how they view offshore exchanges offering> 100 times leverage.”