Lori Schock, director of the US Securities and Exchange Commission‘s Office of Investor Education and Advocacy, has advised investors to do thorough, independent, research before investing in cryptocurrencis.
In a blog post, Schock said while she can’t give investment advice about bitcoin or any other crypto-related investment, she can provide advice on some things investors should consider when deciding if an investment is right for them. Schock noted that cryptocurrencies and related investments are still relatively new, arguing that some investors “may not know exactly who they are dealing with, where their money is going or what they are getting in return.
Schock said the most important thing to know is the crypto-related investment markets are very different than regulated securities markets. She added that the SEC’s securities laws provide important protections that you may not be getting when dealing in cryptocurrency-related investments.
Schock said scam artists prey upon the newness of an investment opportunity when there isn’t as much history about the product. It’s also easier to sell an investor on an “everyone is buying it” sales pitch when there’s a lot of buzz about a certain investment product.
“Don’t fall for high-pressure sales tactics, the promise of guaranteed returns or too good to be true claims,” said Schock. “Take time to make the right investment decision for you. Ask questions and demand clear answers”
In the end, Shock wrote that “cryptocurrencies may be today’s shiny, new opportunity but there are serious risks involved” – and as a result, investors should tread lightly before putting their money into the market.
“Proceed with caution, do your research, evaluate your financial goals and most importantly, don’t flip a coin when you’re making investment decisions,” she said.
Shock’s blog post echoed past warnings by the SEC as well as the Commodity Futures Trading Commission (CFTC). Last week, the CFTC issued a consumer advisory warning against cryptocurrency pump-and-dump schemes. The CFTC said investors should be wary of thinly traded markets, such as cryptocurrencies, because they often promote illicit trading behavior. It added that investors should avoid trading based on information obtained from social media.
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