The Financial Industry Regulatory Authority Regulatory Authority or FINRA, recently put out a statement regarding companies associated with any cryptocurrency or the cryptocurrency industry. The statement essentially was a warning about the potential of scams in the industry. The warning stated that “Unrealistic predictions of exponential returns and unsubstantiated claims made through press releases, spam email, telemarketing calls, or posted online or in social media … may be signs of a classic ‘pump and dump’ fraud,” Finra said, noting that people touting such deals are typically unlicensed.”
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The attention comes after a long time of luring investments given the high rate of return associated with most cryptocurrency. One of the main issues is that people often do not know what they’re investing in before they put their money. Gerri Walsh, FINRA’s senior vice president of investor education stated that “it is important to do your research. Even when legitimate companies enter a hot, new sector, con artists almost always follow suit.” This warning comes at a fairly interesting time in the cryptocurrencies history, as many of the currencies recently reached all time highs and then proceeded to drop down quickly. The high level of volatility means that it is something that is difficult to invest in.
Many investors come into the space unsure of why the market doesn’t react like that of a typical stock market, and they’re surprised to learn how different in actually can be. With an industry that has little regulation, and also comes with a significant amount of challenges, it will be difficult to keep investors from putting their money into it. Hopefully as the end of the year comes and goes, the market on cryptocurrency will be able to stabilize slightly, and end up giving back to the investors who get involved.