The Texas State Securities Board (TSSB) has warned investors about cryptocurrencies, comparing them to the California gold rush and the dotcom bubble.
The financial watchdog says investors are ploughing cash into crypto without understanding it.
The warning states: “Just as many ’90s-era tech investors couldn’t explain why the price of their favourite software stock was going to the moon, few of today’s investors in cryptocurrency-related offerings can explain how cryptocurrencies work or why they are important.
“They just have a case of FOMO: Fear Of Missing Out.
“Extensive hype, combined with investors’ lack of understanding, has made investments related to digital currencies particularly susceptible to fraud.”
It adds: “As an investor, you should look carefully at all aspects of cryptocurrencies before you commit any money to them.
“For example, be sure to examine their potential benefits as well as the dangers they pose.”
— Texas SSB (@TxSSB) January 17, 2020
The TSSB report urges investors to carefully assess all the risks and be mindful of other concerns, such as taxes.
“Remember one of the key principles of smart investing: Never invest in anything you don’t understand,” it concludes.
“It pays to begin with an understanding of cryptocurrencies – what they are, how they work, and the potential consequences of owning or investing in them.”
The TSSB also warns investors to be wary of traditional scams, including those involving precious metals, oil and gas, real estate, and high-yield trading.