US SEC Warns Bitcoin is a Highly Speculative Investment

The US SEC has issued a statement warning investors about the risks inherent in the Bitcoin futures market, hence the need to exercise caution.

May 12, 2021, | AtoZ Markets – The US Securities and Exchange Commission (SEC) has warned mutual fund investors that own bitcoin futures about the risks associated with derivatives.

While such instruments are becoming more popular, they are still based on an asset that is “highly speculative”, volatile and traded in a poorly regulated market, the SEC's investment management department said in a statement.

The agency added that investors should study the information disclosed by the fund and determine an acceptable level of risk for themselves before making investments.

Protecting investors and assessing the regulatory compliance of these funds is a top priority for staff,” the SEC said.

The regulator will also examine, based on the experience of mutual funds investing in bitcoin futures, whether this market is capable of supporting ETFs.

In the course of further monitoring, department employees calculate:

  • analyze the liquidity and depth of the cryptocurrency futures market;
  • assess the ability of mutual funds to liquidate positions on it as needed to meet daily redemption requirements, as well as the effectiveness of risk management;
  • examine the valuation of assets by funds.

The statement also noted that it reflects the opinion of the staff of the investment management department and is not legally binding.

Recall that in April the US Senate approved Gary Gensler as the chairman of the SEC. Commissioner Hester Pierce believes that his leadership of the regulator could be a "very productive period" for the crypto industry.

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