Securities Arbitration Lawyers BlogSEC Issues Investor Alert On Bitcoin
Bitcoin: it’s the virtual currency based on blockchain technology. It’s rising, falling, trading, and the “wave of the future,” depending on who you talk to. Started in 2009 as an international alternative currency, a growing number of businesses are accepting bitcoin as a standard method of payment. PayPal has also begun allowing customers of their cash accounts to buy, sell, and hold Bitcoin and three other cryptocurrencies in their own accounts.
One of the many ways people buy and use use Bitcoin is as an investment vehicle. This includes the purchase of a futures contract strictly for Bitcoin. These contracts are considered commodities, and fall under both the Securities and Exchange Commission and the Commodities Futures Trading Commission.
The SEC and the CFTC recently issued an investor alert to inform the public about funds trading in bitcoin futures. Some investors may decide to invest in bitcoin futures as a way getting into cryptocurrency in a small way.
In this press release, both agencies emphasize that any cryptocurrency investment is speculative, and could rise or fall quickly. It’s important to consider your risk tolerance before investing in any investment, due to the potential for losing the entire amount. Bitcoin is particularly volatile, because of the up-and-down nature of its price. The underlying “spot” or cash Bitcoin market also adds the possibility of fraud and manipulation.
Additionally, the price fluctuations of Bitcoin may not translate into an increase in the value of the fund. The funds trading in the contract may not have direct exposure to the underlying assets, and the time involved in the contract trading can also be different from the spot price. You can learn more about these commodity tradings from the CFTC’s website.
Bitcoin and other cryptocurrencies will continue to be speculative for some time, especially as an investment. Funds that involve Bitcoin futures may bring higher risks when compared to other funds, so consider how a bitcoin future will fit into the complete picture of investments.
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Have You Invested In CryptoCurrency?
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