The Bank of England has warned that cryptocurrency giant Bitcoin could become worthless in years to come, despite its current prominence.
This warning comes from Sir Jon Cunliffe, the deputy governor of the bank, who stated to the BBC that despite crypto’s popularity, “their price can vary quite considerably and could theoretically or practically drop down to zero.”
The Final Conduct Authority (FCA) has pinpointed five key aspects that people investing in crypto need to be aware of.
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The first of these risks is consumer protection, as whilst some investments advertise high returns, cryptoassets may not be subject to sufficient regulation beyond basic anti-money laundering requirements, thus putting your money at risk.
Further to this, there is a high difficulty of valuing crypto assets, therefore making ordinary investors vulnerable to making great losses.
There is also no guarantee that cryptoassets can be converted back to everyday money as this is completely dependent on the supply and demand of the market.
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Fees and charges on investments are also common, so investors should check if their investments are still worthwhile, after factoring-in this common aspect of investing.
Finally, firms may also overstate the returns of products or understate the risks involved; therefore it is extremely important to do your own research and know what you’re getting yourself in for.
So if you’re thinking of investing, it may be worth bearing in mind the important advice of experts and be aware that you could lose everything.
These warnings come after Bitcoin, despite hitting a high of worth in November- with one piece being worth $67,000 (£50,700), suffered a subsequent decline after news spread about the Omicron variant of Covid-19.
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The rise of cryptocurrency however is not to be looked down upon, as since 2020, the value of crypto assets has grown tenfold to around £2tn- the equivalent of 1 percent of global financial assets.
Bitcoin and cryptocurrency have also attracted many big businesses and names who swear by its prosperity.
This notably includes Elon Musk, who despite telling his Twitter followers in October that he wouldn’t 'bet the farm' on cryptocurrency, announced that Tesla would accept Dogecoin (a meme-inspired form of cryptocurrency.
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Ordinary people have also gotten themselves a slice of the pie - The Guardian reported that around 0.1 percent of UK households’ wealth is in cryptocurrencies with up to 2.3m people holding crypto assets.
This shocking statistic, emphasises the importance of, for us ordinary folk especially, to be careful with out money, listen to the experts and not go thinking we’re the next Elon Musk.
Featured Image Credit: AlamyTopics: Elon Musk, Technology, Bitcoin, Cryptocurrency