Don’t cash in on crypto

AUSTRALIANS are “too exposed” to cryptocurrencies, according to the boss of the nation’s securities watchdog, with investors warned against going too long on assets such as bitcoin and ethereum.

Australian Securities and Investments Commission chairman Joe Longo said people who invested heavily in risky digital assets potentially faced massive losses during financial markets gyrations, with bad-faith operators increasingly exposing society’s lack of understanding about the crypto world.

In a wide-ranging interview with the Australian Financial Review, Mr Longo said cryptocurrencies were a key focus for ASIC in 2022 due to the number of people exposed to violent market fluctuations and scams.

“I’m worried about consumer harm and the number of people in Australia exposed to crypto,” Mr Longo told the AFR.

“We know from anecdotal and factual evidence between us and the ACCC, there is definitely an uptick in the number of scams and misconduct leading to people losing money by attempting to invest in cryptocurrencies and assets.

“My personal warning to people is to be careful and don’t put all your money into crypto.”

Mr Longo’s warning echoes the sentiment of the Reserve Bank of Australia, which said late last year crypto investors risked holding speculative assets with “niche” uses that could lose most of their value.

“Anyone purchasing these assets should take care,” RBA governor Philip Lowe said. “There is still a lot of uncertainty about the long-term usefulness of these assets. Before investing, it is best to understand fully the underlying value proposition.”

The two million or so Australians who have invested in cryptocurrencies have been on a wild ride over the past couple of months with assets such as bitcoin and ethereum tumbling from all-time highs.

Bitcoin has fallen nearly 40 per cent in value since reaching $93,549 ($US69,000) on November 10, hovering at a near three-month low of $57,755 ($US41,670) on Thursday morning.

It still remains the world’s biggest crypto and occupies a third of the total market at $1.1 trillion ($US790bn).

Number two player ethereum – which occupies 15 per cent of the market – is currently trading at $4310 ($US3111).

It has fallen by a third since hitting $6599 ($US4867) two months ago.

Equity markets have also been rocked in recent weeks as investors rotate their assets in anticipation of steep rate hikes and Mr Longo said he was concerned people were putting all their eggs in one basket.

“This whole issue of financial literacy is a significant issue,” he told the AFR. “We still have too many people who are making poor decisions around their finances.

“If you’re putting a big proportion of your wealth into a single investment, you really need to be careful.

“We need to encourage people to really get advice before they make any big risktaking decisions.”