US Regulators Warn on Potential Risks in Bitcoin Futures Trading

The US Securities and Exchange Commission’s (SEC) Office of Investor Education and Advocacy (OIEA) and the Commodity Futures Trading Commission’s (CFTC) Office of Customer Education and Outreach (OCEO) issued a warning on Thursday targeting investors who are looking for funds with exposure to Bitcoin futures. According to the investor bulletin, people should exercise caution and be careful about the investment’s potential risks and benefits.

“Among other things, investors should understand that Bitcoin, including gaining exposure through the Bitcoin futures market, is a highly speculative investment,” the regulatory bureaus commented. Furthermore, they raised concerns once again on the Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term that Bitcoin brings to the crypto sphere and that it is being witnessed on the Bitcoin futures markets.

In fact, they cited the lack of regulation and “potential for fraud or manipulation” of the market. The bulletin provides guidance on which elements the investors should pay attention to, such as the risk tolerance, the fund’s disclosure of its risks, potential loss of the investment and the difference in investment outcome.

“A rise in Bitcoin prices may not result in a similar increase in the value of a fund holding positions in Bitcoin futures contracts. This is in part because funds that trade commodity futures contracts may not have direct exposure to the contracts’ underlying assets. Futures contract prices can vary by delivery months and differ from the underlying commodity’s spot price,” the regulators said.

Investment Company Act of 1940

Also, in the bulletin, the bureaus who signed the warning highlighted that funds regulated under the Investment Company Act of 1940 are required to provide critical investor protections, such as: “funds must comply with legal requirements related to valuation and custody of fund assets, and mutual funds and ETFs must comply with Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term requirements.”

Recently, the US SEC opened the doors to establishing cooperation with lawmakers from Congress and other regulatory bodies to work on ways to protect crypto investors.