The US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have warned investors about the risks of investing in funds holding bitcoin futures.
- The US Securities and Exchange Commission issued an investor alert on Bitcoin futures fund trading on Thursday. The alert comes from the SEC’s Office of Investor Education and Advocacy (OIEA) and the CFTC’s Office of Customer Education and Outreach (OCEO).
- They pointed out that some funds may be engaged in the trading of Bitcoin futures contracts as a way to gain exposure to Bitcoin, and emphasized that this cryptocurrency “is a highly speculative investment.” The file warns:
Investors should consider the volatility of Bitcoin and Bitcoin futures markets, as well as the lack of regulation and the possibility of fraud or manipulation in the relevant Bitcoin market.
- They urge investors considering investing in funds that buy and sell bitcoin futures to “carefully weigh the potential risks and returns of their investments,” naming factors such as their risk tolerance, the fund’s disclosure of its risks, and potential investment losses.
- The alert further warned that rising bitcoin prices may not increase the value of fund positions in bitcoin futures contracts for several reasons. For example, these funds may not have direct access to the underlying assets of the contract. In addition, the price of Bitcoin futures contracts may vary depending on the delivery month and is different from the BTC price itself. Futures contracts also expire regularly, leading to volatility in portfolio risk, because expiring futures positions are usually transferred to new contracts.
- At the same time, Gary Gensler, the new chairman of the US Securities and Exchange Commission, has been pushing to strengthen the supervision of the crypto sector, especially crypto exchanges. To date, the SEC has taken 75 encryption-related enforcement actions against the industry. Gensler called on Congress to pass a law to protect investors.
What do you think of the US Securities and Exchange Commission and the Commodity Futures Trading Commission’s warnings about funds investing in Bitcoin futures? Tell us in the comments section below.
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