Why The SEC Issued A Warning To Bitcoin Futures Investors

The U.S. Securities and Exchange Commission (SEC) has issued yet another cautionary bulletin for Bitcoin investors. Specifically, the Commission has warned about the dangers for BTC futures traders and has asked them to “weigh carefully the potential risks and benefits of the investment”.

The bulletin called “Funds Trading in Bitcoin Futures” is part of a long list of these articles dedicated to cryptocurrencies and digital assets.

The first one was published on July 23, 2013, and was titled “Investor Alert: Ponzi Schemes Using Virtual Currencies”. In this article, the Commission warns investors about Bitcoin and explains in detail the characteristics of a Ponzi Scheme, a type of scam where existing participants received payments from new contributors.

The SEC classified these schemes as non-legitimate investments and claimed to be concern about fraudsters utilizing Bitcoin to commit or facilitate this scam. In addition, the SEC claimed exchange platform could also be part of the illegal scheme.

Despite the date of publication, apparently not much has changed for the Commission as their latest bulleting on BTC claims the following:

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.

Bitcoin Attack By More FUD

The SEC clarifies that BTC has been classified as a commodity in the U.S. Therefore, futures contracts must be traded with a “regulated and supervised” entity by the Commodities and Futures Trading Commission (CFTC).

The regulator claims that all platforms offering this product to U.S. citizens must comply with certain legal requirements. Caitlin Long, part of the state of Wyoming Blockchain Select Committee, said:

SEC is issuing this investor warning re onshore exchanges, which offer only about 2.5x leverage–just imagine how it views offshore exchanges offering >100x leverage.

At the time of writing, BTC trades at $36,872 with sideways movement in the 1-hour and 24-hour charts. In the derivatives sector, funding rates across exchange platforms have flipped from positive to negative and vice versa during the past few days.

Thus, the general sentiment in the market seems to be following the price action; there is no clear direction. In the short term, BTC must reclaim the higher area around current levels and make a push towards the $40,000 price mark.

The SEC and other U.S. government officials and federal entities have been hitting the market with many negative announcements. From the SEC bulletin to the Department of State’s statements on a BTC ransom recovered from hackers. The market has been susceptible to this news but seems more impervious to their effects.