Cadwalader, Wickersham & Taft LLP
21 June 2021
The SEC Office of Investor Education and Advocacy
(“OIEA”) and the CFTC Office of Customer Education and
Outreach (“OCEO”) cautioned investors on the risks associated
with investing in a fund that has exposure to the Bitcoin futures
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In a bulletin, the OIEA and OCEO reminded investors that (i)
Bitcoin is a digital asset that is derived from blockchain
technology, (ii) a Bitcoin futures contract is an agreement to
purchase or sell a certain amount of Bitcoin at a set price on a
specific date in the future, and (iii) such trading in the U.S. is
required to take place on a CFTC-regulated futures exchange.
The OIEA and OCEO recommended that investors looking to invest
in a fund that purchases or sells Bitcoin futures should
the potentially heightened risk of financial loss associated
with Bitcoin futures contracts considering (i) the high volatility
of the value of Bitcoin and (ii) the possibility of falling victim
to fraud or manipulation in the underlying cash Bitcoin
the potential for a difference between the price of Bitcoin and
the value of a fund’s positions in Bitcoin futures contracts as
a result of (i) a fund’s lack of direct exposure to the futures
contract’s underlying assets, and (ii) the periodic expiration
of futures contracts, which can lead to fluctuations in the
their risk tolerance; and
disclosures in the fund’s prospectus concerning the
principal risks associated with investing in such fund.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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