Should you invest in bitcoin right now?
When bitcoin was launched initially, it was meant to be a platform that allows for anonymous payments. The cryptocurrency can still be used to make payments, as more and more merchants are allowing people to pay in bitcoin, including some online casinos.
However, its volatility means it might not make sense to use it to make payments. Does that mean you should invest in bitcoin, or should you just avoid it entirely? It depends on whom you ask.
Bitcoin pulls back from record high
Bitcoin and other cryptocurrencies have been on a bullish run the last several weeks. On Friday, bitcoin hit a new all-time high close to $42,000, but it has since pulled back as many investors take profits. Investors also took profits in other cryptocurrencies as the entire market pulled back. According to CNBC, some $200 billion has been wiped off the crypto market in only 24 hours, driven by the pullback in the bitcoin price.
Data from coinmarketcap reveals that the cryptocurrency’s market capitalization was $880 billion at 9:20 a.m. Eastern, a decrease from $1.08 trillion on Sunday. Bitcoin declined more than 12% in 24 hours, according to data from Coin Metrics. Ether, which is the second-biggest cryptocurrency by market cap, fell 23% to about $1,000.
U.K. regulator advises against investing in cryptocurrencies
On Monday, the U.K.’s Financial Conduct Authority issued a statement advising investors to stay away from bitcoin and other cryptocurrencies. The regulator said it is aware that some firms are offering crypto-asset investments with promises of high returns.
However, the FCA added that investing in crypto-assets “generally involves taking very high risks with investors’ money.” Thus, the agency said investors who opt for such products “should be prepared to lose all their money.”
The FCA also outlined several risks associated with investing in crypto-assets, including consumer protection, because some products aren’t subject to regulation other than anti-money laundering requirements. The regulator also noted that the prices of cryptocurrencies are incredibly volatile, and it’s difficult to value them “reliably.”
Further, the FCA said many products and services involving cryptocurrencies are complex, making it difficult for consumers to understand the risks. The agency also said there’s no guarantee that crypto-assets can be converted back to cash. The FCA also warned about fees and charges on their investments, which could be more than those on regulated investment products. The regulator added that some firms might overstate the returns of products or understate the risks in their marketing materials.