SEC Advises Caution When Investing in the Bitcoin Futures Markets 16

SEC Advises Caution When Investing in the Bitcoin Futures Markets

  • The SEC has issued a statement advising investors to be cautious when trading Bitcoin futures
  • The statement went on to describe Bitcoin as being highly speculative
  • The SEC believes that the Bitcoin futures market should be pursued only by mutual funds
  • The advisory by the SEC could be a precursor to rejecting pending Bitcoin ETF applications

The US Securities and Exchange Commission has issued a statement advising investors to take caution when investing in the Bitcoin futures market.

The statement was issued by the Division of Investment Management (I.M) staff and goes on to explain that Bitcoin and its futures markets are highly speculative. In addition, these markets lack regulation with a considerable probability of being manipulated.

An excerpt of the I.M staff advisory on Bitcoin and the Bitcoin futures markets can be found below.

…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.

As with any fund investment, investors should focus on the level of risk they are taking on, and the level of risk they are comfortable taking on, prior to making an investment.

Bitcoin Futures Market Should be Pursued only by Mutual Funds

With respect to the Bitcoin futures market, the Division of Investment Management at the SEC believes that it is best pursued ‘by mutual funds with appropriate strategies that support this type of investment and full disclosure of material risks’.

Is the Statement in Preparation for a Bitcoin ETF Rejection?

To note is that several Bitcoin ETF applications are pending at the SEC. Therefore, the issuance of an advisory against the Bitcoin futures market could be loosely translated to mean that the SEC believes that the traditional markets are not yet ready for a Bitcoin ETF.

Contrarily, the statement could be considered as a ‘disclaimer’ by the regulatory body ahead of a possible approval of a Bitcoin ETF application. The statement could be setting the pace for other regulatory measures to ensure that a Bitcoin ETF is approved and offered only to accredited investors such as the aforementioned mutual funds.

However, only time will tell as to what direction the SEC takes with the pending Bitcoin ETF applications.