Most people have embraced investing in the cryptocurrency trading opportunities. The trend was overwhelmed in many countries where the UK Financial Co
Most people have embraced investing in the cryptocurrency trading opportunities. The trend was overwhelmed in many countries where the UK Financial Conduct Authority has raised concerns and warned the investors about the risks they are facing in contracts-for-differences which is a type of financial derivative.
The Financial Conduct Authority is the main financial regulator and watchdog of business activities in the United Kingdom and has issued a warning to the consumer about the risks of becoming involved in cryptocurrency contracts for the differences as an investment opportunity. A CFD contract signs that two parties exchange the difference between the opening and closing prices of a cryptocurrency during a given period of time. This speculative contract could generate a negative difference that would cost the buyer when the price falls and, therefore, is considered high risk by the regulator and the control body.
It is an extreme trick to attract investors, since CFDs are offered with leverage, which means that you only need to reduce a part of the total value of investments, explained the FCA. However, leverage also multiplies the impact of price changes on both profits and losses. This means that you can lose money very quickly. Bitcoin and Ethereum are two good examples of cryptocurrencies speculated in a CFD.
The agency listed price volatility, leverage, transparency and pricing and financing costs as its four fundamental concerns behind the consumer warning. Some companies offer leverage of up to 50: 1, the FCA added, telling consumers that they could end up losing their investment altogether and end up owning money to the company. Fees for CFD cryptocurrencies tend to be significantly higher than other CFD products, the authority added.
The watchdog agency confirmed that all CFDs are under its regulatory oversight, including cryptocurrency CFDs. The FCA joined other international counterparts around the world by issuing a consumer warning against initial currency offers, or ICO, calling them high-risk speculative investments warning those who participate in doing it on their own risk and won’t be insured.