Bitcoin hits record highs – but crypto backers risk losing everything, warns Central Bank

Bitcoin, the best known and longest established so-called cryptocurrency hit an all-time high on Wednesday, for the fourth time in six days, bolstered by record-breaking levels of cash flowing into US exchange traded funds tied to the cryptocurrency.

Many buyers are convinced that bitcoin’s integral scarcity, including supply that restricts over time, means it has a value – despite there being little practical use for the assets.

Money has piled into the crypto sector including from financial institutions however, triggered in significant measure by regulators opening up the well-established US exchange traded fund (ETF) market to cryptocurrency.

The sharp rise in the price of crypto is also drawing in many buyers, hoping to catch a rising wave or fearful of missing out – as they see their peers book apparently large gains for no effort, often on punts made over smartphone on the apps of highly sophisticated trading platforms.

Bitcoin, the world’s largest cryptocurrency by far, reached a high of $73,664 on Wednesday after the net daily inflows into US spot bitcoin ETFs topped $1bn for the first time a day earlier, according to data compiled by Bloomberg.

For many observers, the advent of bitcoin ETF has given the often scandal- and scam-hit sector a mark of legitimacy. The financial machinery of the ETF market also makes it possible to draw in very large amounts of investment.

But the Central Bank of Ireland (CBI) has posted a stark warning to consumers – pointing not only to the many scams linked to crypto but also the extreme volatility of the market itself.

“Consumers could face the possibility of losing all their money if they buy crypto.

If you are offered something that seems too good to be true, it is most likely a scam

“If you are thinking about buying crypto or related products and services, you should ask yourself if you can afford to lose some, or even all of the money you spend,” said the CBI warning, which has been pushed out through its social media channels.

“Crypto can be subject to sudden and extreme price movements. Buying crypto is therefore speculative, making it unsuitable as a store of value,” the CBI said.

Unverified advertising claims and outright scams are common, the warning adds.

“Such scams aim to deprive you of your money using a variety of techniques, including phishing. Be wary of organisations/individuals who are pressuring you to invest ‘ASAP’, or are promising fast/high returns.

“If you are offered something that seems too good to be true, it is most likely a scam.”

Meanwhile the rush to fill ETF orders continues apace.

“The reasons behind the rally are pretty clear: a rampant demand for the physically-backed ETFs amid a low market depth backdrop,” according to Manuel Villegas, digital assets analyst at Swiss private bank Julius Baer.

As ETF issuers are buying up large piles of bitcoin to support their products, the available supply has begun to dwindle.