'Unfair' To Compare Gold To Bitcoin As Crypto Space Lacks 'Depth' - ABC Bullion
(Kitco News) - Gold and silver investments should not be missed out on amid the recent crypto craze, said ABC Bullion’s global general manager, pointing out that risks associated with digital currencies are often overlooked.
Crypto’s “huge returns of late” might not be able to protect traders against much bigger problems that exist within the cryptocurrencies space, Nicholas Frappell told Australian Mining in an interview on Wednesday.
“It would be unfair to compare something like bitcoin with an asset like gold, whose use as money goes back to the beginnings of recorded time, but the fact is that there isn’t a lot of depth to the market at the moment, and it is tough to gauge just how hard the market would fall to clear if a large group of cryptocurrency investors decided to exit the market at the same time,” ABC’s GM Frappell said.
In comparison, the precious metals markets offers a very safe choice, he noted.
“Unlike almost all ‘Crypto’, gold and silver are traded on a combination of regulated exchanges in the true meaning of the word, or on markets via regulated intermediaries,” he said. “Huge protections exist to aid investors that are not apparent in the crypto-currency space. This will change, as regulators in major economies seek to extend their powers to the trading of ‘virtual currencies’.”
Frappell listed some of the risks linked to various virtual currencies: unregulated or unsupervised trading platforms; cybersecurity risks, such as hacking of trading platforms or e-wallets; speculative risks surrounding volatile price movements; and manipulation risks like insider trading or Ponzi schemes.
With time, some of the risks could potentially be mitigated, as government regulators step up their oversight, but the impact of that oversight on the market is currently unclear, said Frappell.
“As a Federal market regulator, the U.S. Commodities Futures Trading Commission (CFTC) is cognizant of the considerable risks of virtual currencies like Bitcoin,” he said.
In the end of January CFTC is holding a meeting dedicated to discussing virtual currencies, their status, as well as some of the main risks and opportunities associated with them.