Warning that Bitcoin's in a bubble that's likely to burst
PEOPLE buying bitcoin should be prepared to lose their money, a senior UK regulator says.
The price of the cryptocurrency has been soaring in recent weeks. With that has come many new investors, hoping to make money from the surging interest in the virtual currency.
But others have warned that the rocketing value of bitcoin can only be temporary and that it is stuck in a bubble.
That could eventually come to an end in a spectacular burst, says Andrew Bailey, head of the Financial Conduct Authority.
He has given a "serious warning” that people investing in the cryptocurrency should be ready to lose their money.
We know "relatively little” about how the prices change and so we should expect it to stay volatile as it has been over recent months, he cautioned.
But that volatility could eventually be the result of a dramatic plunge, which would leave many people invested in the cryptocurrency out of pocket.
"It's not a currency - it's actually not regulated in its Bitcoin form,” Mr Bailey said in a Newsnight interview.
"It's a very volatile commodity in terms of its pricing. If you look at what has happened this year, I would caution people. We know relatively little about what informs the price of Bitcoin.
"It's an odd commodity as well, as the supply is fixed. If you want to invest in Bitcoin, be prepared to lose your money - that would be my serious warning.”
Many have criticised regulators including Mr Bailey's organisation for failing to keep up with bitcoin, and allowing it to be used with little restriction.
Accusations are that the cryptocurrency allows criminals to flourish since it can be used anonymously and without much oversight, allowing it to flourish as a way of buying drugs and guns on the dark net, for instance.
But he said that since it is a commodity and not really a currency, it didn't need to be regulated in the same way and any new powers would be up to parliament to decide.
Andrew Griffin, The Independent