The head of the Financial Conduct Authority (FCA), Britain’s top financial regulatory organization, does not believe Bitcoin’s outrageous growth can continue much longer. In fact, he thinks a massive bubble burst is on the way for the cryptocurrency.
Andrew Bailey, the head of the FCA, has issued a serious warning to buyers and investors of Bitcoin: you’re going to lose your money. He warned that very little is known about how value is assigned to the cryptocurrency, and its volatility indicates that a dramatic price plunge looks to be on the way.
In an interview with Newsnight, Bailey offered these thoughts on Bitcoin:
“It’s not a currency; it’s actually not regulated in its Bitcoin form. 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.”
Bitcoin has come under fire from multiple watchdog groups due to loose regulations and the relative anonymity it can be used with. For example, it has found value on the dark web in order to purchase drugs and guns, due to the difficulty in tracing owners.
Loose regulations on Bitcoin are due to the grey area it operates in: although it is billed as a form of currency, it is not supported or backed by any governmental body. In some ways, it is therefore viewed in the financial community as a commodity, similar to aluminum, natural gas, or corn.
Regardless of regulations or how it is classified, many financial experts have warned the same thing: be wary of the bubble. It is too volatile right now to trust that its value will continue to increase, especially at its recent levels.
Watch the experts at Business Insider break down why the bubble is destined to burst:
Featured image via Flickr user Antana / CC BY-SA 2.0.
