SEC Warns Investors against ‘Highly Speculative’ Bitcoin Funds

Divisions of the United States’ two top agencies, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), reiterated the risks involved with funds having exposure to Bitcoin.

A note published last Thursday by the SEC’s Office of Investor Education and Advocacy (OIEA) and the CFTC’s Office of Customer Education and Outreach (OCEO) urged investors interested in such crypto-exposed funds to carefully consider the involved risks and benefits.

“Investors should focus on the level of risk they are taking compared to the level of risk they are comfortable taking,” the joint statement stated.

Additionally, the warning considered positions in Bitcoin and Bitcoin futures contracts as ‘highly speculative'. Further, it stressed that investors should properly understand the risks associated with Bitcoin and the Bitcoin futures instruments.

“Investors should consider the Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term of Bitcoin and the Bitcoin futures market, as well as the lack of Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term and potential for fraud or manipulation in the underlying Bitcoin market,” the warning added.

Multiple Warnings

This is the second such warning issued by the US regulatory agency on the risks associated with Bitcoin investments. Moreover, the timings remained crucial as several companies in the country are pushing to get SEC approval to list Bitcoin and Ethereum exchange-traded funds (ETFs).

Last month, another note from the SEC to the investors highlighted the agency’s negative stance towards Bitcoin ETFs due to the speculative nature of the asset class.

“Funds regulated under the Investment Company Act of 1940 and its rules ('funds') are required to provide important investor protections,” the latest warning added. “Those protections apply to all of a fund’s holdings, including holdings of Bitcoin futures contracts. Some funds may engage in the trading of Bitcoin futures contracts as one way to gain exposure to Bitcoin.”

“Funds that buy or sell Bitcoin futures may have unique characteristics and heightened risks compared to other funds.”