Bitcoin: Cryptocurrency surges by over five percent
Bitcoin is currently trading at $31,000 (£22,928) per coin compared to $41,500 (£30,694) on January 7. This move hasn’t reflected wider stock market moves, with global stocks remaining largely flat.
In response Britain’s Financial Conduct Authority (FCA) issued a stark warning about the dangers of investing in cryptocurrencies.
It said: “If consumers invest, they should be prepared to lose all their money.
“Some investments advertising high returns from cryptoassets may not be subject to regulation beyond anti-money laundering.
“Significant price volatility, combined with the difficulties valuing [Bitcoin] reliably, place consumers at a high risk of losses.”
Bitcoin has fallen in value by 20 percent
Each Bitcoin is now worth $31,000 (£22,928)
The FCA warned cryptocurrency investments are unlikely to be protected by the UK’s Financial Services Compensation Scheme or the Financial Ombudsman Service.
Speaking to Sky News Laith Khalaf, who works as a financial analyst at investment firm AJ Bell, warned about cryptocurrency scams.
He said: “You can see how the rapid price appreciation of Bitcoin, combined with aggressive marketing and low interest rates on cash, creates a perfect storm for consumers looking to get a decent return on their money.
“Unfortunately Bitcoin and other cryptoassets are subject to dramatic price falls as well as rises.
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“Consumers should be on high alert for unsolicited communications linked to Bitcoin”
“Consumers should be on high alert for unsolicited communications linked to Bitcoin or other cryptocurrencies and should consider any marketing material with an extremely critical eye.
“They should also make sure any firm they are dealing with is regulated, or at least has temporary permissions from the regulator.”
Bitcoin was launched in 2009 by an unknown individual or group using open-source software.
A digital currency which doesn’t have a central bank Bitcoin works around peer-to-peer exchanges.
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“If consumers invest, they should be prepared to lose all their money”
Bitcoin was launched back in 2009
However it has been criticised by some law enforcement agencies following widespread use by criminal groups.
Bitcoin is by some margin the most popular of the digital currencies.
Susannah Streeter, a Hargreaves Lansdown market analyst, said the FCA warning is significant.
She commented: “There is much speculation that bitcoin will become more mainstream, especially with more institutional investors becoming involved, but the future of cryptocurrencies remains highly uncertain.
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“Bitcoin’s price is being driven primarily by future price speculation rather than an underlying use case.
“The Financial Conduct Authority clearly believes the crypto Wild West could be running out of control, and is warning that consumers risk losing all their money if they succumb to promises of fast and high returns.”
As a result of its volatility and lack of transparency there have been calls for Bitcoin to be closed down.
Joseph Stiglitz has called for cryptocurrencies to be “shut down”
Nobel Prize winning economist Joseph Stiglitz, former World Bank chief economist, made this argument in 2019.
Speaking to CNBC he said: “I actually think we should shut down the cryptocurrencies.”
Mr Stiglitz argued cryptocurrencies transfer money “from a transparent platform into a dark platform”.