The US Securities and Exchange Commission has released a new number of its Investor Alerts and Bulletin in which it lists 4 factors that potential investors must take into consideration before investing in Bitcoin.
According to the bulletin, “among other things, investors should understand that Bitcoin, including gaining exposure through the Bitcoin futures market, is a highly speculative investment. As such, investors should consider the volatility of Bitcoin and the Bitcoin futures market, as well as the lack of regulation and potential for fraud or manipulation in the underlying Bitcoin market.
In particular, the regulator has advised investors to consider the factors below:
- Risk tolerance. Investors must be aware of how much risk they can take before they decide to put their money into Bitcoin.
- The risks associated to the fund they plan to invest in. All funds must provide investors with clear information about the risks associated to investing in it.
- Potential loss of the investment. Investors must know that investing in funds with exposure to Bitcoin might result in the loss of 100% of the investment.
- Difference in investment outcome. Investors must be aware of the fact that the investment in a fund might not have the same performance as investing in BTC directly because funds trading commodity futures contracts may not have direct exposure to the contracts’ underlying assets.
The regulator has noted that Bitcoin-exposed funds behave differently than traditional funds, so investors must due their own research and make sure they understand how the fund works before investing in it.