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Spotlight on bitcoin investment claims as ASA censures Coinfloor

 

‘’The spotlight has been shone once again on companies which offer crypto-assets with lofty promises to investors, underlining the risks that these types of investment can pose to consumers.

The advertising standards authority has stepped in, upholding a complaint against Coinfloor for irresponsibly suggesting that buying Bitcoin was a good or secure way to invest savings or a pension.  The watchdog also said that the crypto exchange failed to make clear the risks associated with Bitcoin investments in its advert.

There is clearly a growing concern at the heart of regulatory bodies about the increased speculation surrounding crypto currencies.  The ASA judgement comes after a warning from the Financial Conduct Authority in January that consumers risk losing all their money if they succumb to promises of fast and high returns made by firms offering investments in or linked to cryptoassets.

The ruling comes at a timely moment, given it is soon after another steep but volatile upwards run of Bitcoin. The crypto currency fell by almost ten per cent on Monday after surging to another record high of at $61,742 on Saturday, on a jagged upward trajectory. The latest rally took place amid speculation that some of the stimulus cheques signed by the US government could end up being spent on the cryptocurrency.

This isn’t the first time bitcoin has seen a sharp rises and corrections. Over the course of 2017, bitcoin holders saw their investment grow by 1235%. But the year that followed saw the cryptocurrency lose up more than 70% of its value. The wild price swings in Bitcoin occur because there’s no widely accepted way to work out the price of bitcoin. With no underlying ‘value’, price is driven only by the interaction of supply and demand so there is no reliable basis for a valuation.

Although cryptocurrencies look set to be here to stay in some form, the long-term direction of travel, in terms of price is far from certain. Bitcoin’s recent surge has come off the back of increased corporate and institutional interest, with more organisations as well as hard core fans appearing to have more confidence in the future of the currency. But it’s still highly difficult to assess the right time to buy or sell because it’s so speculative and volatile. A lot of the demand has been from people hoping to benefit from future price rises rather than use bitcoin as a means of exchange.

The UK’s regulatory authorities are clearly worried that the price volatility and product complexity of such assets places consumers at a high risk of losses. Despite the endorsement of high profile individuals like Elon Musk and an increasing number of firms and financial institutions ploughing money in, investing in crypto-assets should only be under-taken within a well-diversified portfolio. If you really want to invest, it should only take up a very small proportion of your holdings and you should only do it with money you are prepared to risk losing.’

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