In January 2021, the FCA explicitly warned investors that they could risk losing all their money when investing in digital assets including Bitcoin.
This came after the price of Bitcoin fell 28 per cent from its (then) record high of $42,000.
Cryptocurrencies have received particular attention from the watchdog which has claimed investors do not fully understand how they work. In October 2020, it acted on this to ban the sale of crypto-derivatives to retail investors.
The regulator estimated this ban alone could save investors from £53m losses a year.
James McManus, chief investment officer at Nutmeg, said: “The regulator is right to differentiate the practices of responsible investment firms helping people to achieve their financial goals with a long-term investing mindset, from those unscrupulous firms promoting high-risk investments to investors for whom they are unlikely to be suitable.
“In truth, what we’ve seen with the meme stocks’ saga and the extreme volatility in cryptoassets are timely examples of the perils of a short-term approach to investing driven by hype. These moments should act as a clear warning that market noise is often just that and if something sounds too good to be true, it probably is."
Jon Yarker is a freelance reporter for FTAdviser