European Union (EU) regulators have issued a stern warning against the highly volatile nature of cryptocurrencies including Bitcoin. The European regulator made the announcement on Monday, describing cryptocurrencies as “highly risky” and as a result, it has concluded that they are not ideal for investments.
It seems like other European regulators such as the European Supervisory Authorities (ESAs) and the European Central Bank (ECB) among others have also shared the same opinion on cryptocurrency. The joint warning from the regulators pointed out that virtual currencies (VCs) have demonstrated a lot of volatility over the past few months and that they have the characteristics of a pricing bubble. This means that investors might end up losing their investment if the prices take a dive.
The regulators pointed out that: “Some VC exchanges have been subject to severe operational problems in the past. During these disruptions, consumers have been unable to buy and sell VCs when they wanted to and have suffered losses due to price fluctuations during the period of disruption,”
The European regulators also mentioned the other risks that are associated with cryptocurrencies, such as crypto exchanges that are out to scam people of their hard earned cash, or even cyber-attacks which usually target exchanges. The ESAs warned about the high level of risk that is associated with unregulated products, stating that this makes them unsuitable as an option for investment, retirement planning or savings. The announcement also highlights the fact that regulators are worried about the growing number of people that have been naively acquiring cryptocurrency without considering the risks that are involved.
The best example to demonstrate the worries expressed by the regulators is the performance of Bitcoin. Its price made significant gains throughout 2017 especially towards the end of the year but it seemed to have kicked off 2017 on a rocky road because the price has lost a lot of value. This has further strengthened the claims that Bitcoin is a bubble waiting to burst.
The rising price of the cryptocurrency in 2017 was due to its growing popularity which led to more people jumping on board to get a piece of the pie. However, recent negative news such as the pursuit of regulations against cryptocurrencies by various countries and even the banning of crypto exchanges are believed to have contributed to the bearish performance. Regulating cryptocurrency has turned out to be a headache for law enforcers due to the fact that digital currencies are decentralized.
Intro: European regulators have jointly released a warning about the dangers of investing in cryptocurrency due to the high volatility and the lack of regulation.