FCA: Bitcoin investors 'should be prepared to lose all their money'

Some crypto investment firms may be overstating potential payouts and understating the risks, regulator suggests

Stocks for the most well-known cryptocurrencies

The Financial Conduct Authority (FCA) has issued a warning for budding cryptocurrency investors, suggesting they should be prepared to "lose all their money". 

The watchdog said on Monday that products that promise high returns from crypto assets, such as Bitcoin, came with big risks.

The warning comes amid volatile spikes in the valuation of Bitcoin, which has recently hit an all-time high of $36,352.20 (£26,627.80). Cryptocurrencies have always fluctuated extravagantly, making them risky investment prospects. 

The FCA has urged consumers to make sure they fully understand what they are investing in and the financial risks involved, warning that cryptocurrency investments are generally not protected by UK schemes that help consumers to reclaim cash when companies collapse.

The regulator is particularly concerned about crypto investment firms that might be overstating potential payouts and understating the risks. 

"The FCA is aware that some firms are offering investments in crypto assets, or lending or investments linked to crypto assets, that promise high returns," the regulator said on Monday.

"Investing in crypto assets, or investments and lending linked to them generally involves taking very high risks with investors money. If consumers invest in these types of product, they should be prepared to lose all their money."

The fluctuation of Bitcoin over the last few weeks almost helps to illustrate the FCA's warning. In December its valuation surpassed the $22,000-barrier for the first time, marking an impressive 175% rise in 2020. This continued into the new year, hitting more than $35,000 in the first week of 2021. 

However, it fell 12%, down to $33,447 in the following week, with other cryptocurrencies, such as Ethereum falling as much as 20% to a one-week low of $1,007.51, according to Reuters

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