Written by Laura Sanchez
Investing.com – Not surprisingly, he did it again. Elon Musk, CEO of Tesla (NASDAQ :), tweeted “That’s the real power” with a photo of actor Chuck Norris attached to him.
Agents of this sector are advocating investment in cryptocurrencies. Alejandro Zala, Bitpanda Country Manager in Spain, confirms that “asset coding is an extraordinary technological advance. Very low lowest. “
According to Zala, “Investors should be aware of the risks involved in assets and their corresponding volatility. The best way to invest is always to diversify, have a long-term strategy, and understand above all the product and market dynamics of the operator. Once this analysis and decision is made, from It is imperative to choose a platform that has experience, scale and ability to compete in commissions. ”
However, given this boom in the cryptocurrency sector, Spanish regulators have once again called for caution. The Bank of Spain and the National Securities Market Authority (CNMV) had already warned in 2018 of the “risks” of this type of investment due, among other factors, to its “extreme volatility, complexity and lack of transparency that make it a great risk. An adventure.”
And now they did it again: this is the joint statement:
“In recent months, many cryptocurrencies, including Bitcoin, have experienced high volatility in their prices, which has accompanied a significant increase in advertising, which is sometimes aggressive, to attract investors.
Crypto assets, including cryptocurrencies and the technology that support them, can be elements that activate and update the financial system in the coming years, but to assess their viability as an investment alternative or use as a means of payment, it is also necessary to have the following aspects and risks significantly:
The organizational scope
There is still no framework in the European Union that regulates crypto assets like Bitcoin, and provides guarantees and protections similar to those applied to financial products. Currently, a regulation (known as MiCA) is being negotiated at the European level aimed at creating a regulatory framework for the issuance of crypto assets and service providers on these rules.
From a legal point of view, cryptocurrencies:
It is not considered a method of payment.
They do not have the support of the central bank or other public authorities.
They are not covered by customer protection mechanisms such as the Deposit Guarantee Fund or the Investor Guarantee Fund.
High risk investment
It is estimated that there are more than 7,000 cryptocurrencies on the market with characteristics similar to those of Bitcoin. These are complex tools, which may not be suitable for small savers, and whose price has a high speculative element that may lead to a complete loss of investment.
In addition, there are leveraged derivative products associated with cryptocurrencies that allow you to invest in them indirectly, which increases their complexity and the possibility of incurring greater losses than the initial investment, so they require great knowledge and experience.
Price formation
Cryptocurrency prices are formed in the absence of effective mechanisms to prevent them from being manipulated, such as those found in regulated stock markets. In many cases, prices are also formed without public information to support them.
Liquidity
Many of these digital currencies can find themselves lacking the necessary liquidity to be able to withdraw from an investment without incurring significant losses, especially since their trading between investors, whether individuals or professionals, is very limited.
Use as payment method
Despite the fact that it has been around for more than a decade, acceptance of cryptocurrencies as a method of payment is still very limited, which contrasts with many other digital developments that have gained general acceptance in much less time.
It is imperative that you remember that there is no obligation to accept Bitcoin or any other cryptocurrency as a means of paying off debts or other obligations. Future MiCA regulations don’t anticipate that this will change.
Moreover, due to their high volatility, cryptocurrencies do not adequately perform the functions of unit of account and store of value. Problems derived from the cross-border nature: On many occasions, there are no different actors involved in issuing, possessing and marketing crypto assets in Spain or, in some cases, even their location is not possible, and therefore resolving any conflict may be costly and beyond the purview of the authorities Spanish.
Theft, fraud, or loss
The distributed ledger technology used to issue cryptocurrencies carries a specific risk. They are neither regulated nor supervised. Lost or stolen private keys can mean losing cryptocurrency, with no possibility of recovery. These risks must be assessed before obtaining these assets, whether the portfolio is managed personally or if custody is left to third parties.
