Financial watchdog warns of risky cryptoasset investments as bitcoin tumbles – b…

Despite its overnight dive, bitcoin has still more than quadrupled over the last year.

CNBC reports that there may be some profit taking:

The sell-off in cryptocurrencies comes after a huge rally and perhaps signals some profit-taking from investors. Bitcoin is still up over 340% in the last 12-months and last week hit an all-time high just below $42,000.

“The correction we saw was expected as we believe the BTC price surge recently from under $20,000 to $40,000 in the past four weeks will induce sell pressure,” Simons Chen, executive director of investment and trading at cryptocurrency financial services firm Babel Finance, told CNBC.

Scott Minerd of Guggenheim Partners also reckons prices reached unsustainable levels in recent days.

Last month, Minerd suggested that bitcoin should be worth $400,000 on a ‘fundamental basis’, based on its finite supply and value compared with gold. Guggenheim outlined plans to invest in bitcoin last November, as a hedge against “rampant money printing” by central banks.

The FCA says it has five concerns about investments which are offering the prospect of high returns from investing in cryptoassets:

• Consumer protection: Some investments advertising high returns based on cryptoassets may not be subject to regulation beyond anti-money laundering requirements.
• Price volatility: Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses.
• Product complexity: The complexity of some products and services relating to cryptoassets can make it hard for consumers to understand the risks. There is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market.
• Charges and fees: Consumers should consider the impact of fees and charges on their investment which may be more than those for regulated investment products.
• Marketing materials: Firms may overstate the returns of products or understate the risks involved.

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Britain’s financial watchdog has just issued a warning to consumers tempted by the promise of high returns from investing in cryptocurrencies such as bitcoin – you might lose all your money.

The Financial Conduct Authority says it is aware that some firms are offering customers the promise of high returns through investing in…