By Yasin Ebrahim
Investing.com – Bitcoin slumped to a one-week low Monday, after the U.K. financial regulator sounded the alarm on investing in cryptocurrencies, warning that investors could lose all their money.
Bitcoin fell 17%, to $31,471, after rising above a record high $42,000 last week.
The U.K. financial watchdog Financial Conduct Authority said investors "should be prepared to lose all their money" if they invest in high-risk cryptocurrencies.
The regulator said customers who have been mis-sold crypto investments were unlikely to receive protection that investors in regular investments like stocks and bonds enjoyed.
In the U.K., investors have made trades on bitcoin worth nearly £1 billion in the first seven days of the year, aggregated data from digital currency exchanges showed.
The warning comes in the wake of an impressive rally in the popular crypto, which is up more than 12% this year, despite the slump on Monday.
Billionaire fund manager Jeffrey Gundlach raised concerns Monday about meteoric rise in bitcoin to "bubble territory," on an interview with CNBC.
Bank of America (NYSE:BAC) appeared to go a step further, recently dubbing the bitcoin rally as "the mother of all bubbles," citing another case of speculative mania.
Many proponents of bitcoin, however, have recently suggested that cryptocurrency is unlikely to repeat the dramatic rise and fall of 2017-2018. The need to find a hedge against the expected backdrop of rising inflation and lower for longer rates will likely keep the cryptocurrency in demand.
Bitcoin is "probably going to $100,000, then $150,000, then $200,000," Chamath Palihapitiya, chief executive of Social Capital, said in an interview on CNBC last week.
Recent events including the eroding of trust in the public sector officials have stoked demand for bitcoin on the growing need to have insurance that "provides an uncorrelated hedge," but eventually the popular crypto will "transition into something much more important," Palihapitiya added.