Risks Associated with Cryptocurrencies

The value of your investments can go down as well as up, so you could get back less than you invested

Consumers should only invest in crypto assets if they understand the risks involved and are prepared to lose all their money.

Consumers should not expect protection from the Financial Service Compensation Scheme (FSCS) or Financial Ombudsman Service (the ombudsman service) if something goes wrong.

Disclaimer: Risks Associated with Crypto Assets

Consumers should only invest in cryptoassets if they understand the risks involved and are prepared to lose all their money.

Consumers should not expect protection from the Financial Service Compensation Scheme (FSCS) or Financial Ombudsman Service (the ombudsman service) if something goes wrong.

1. Volatility and Price Fluctuations:

  • You must be prepared to lose all of your capital

  • Investment in Crypto is extremely risky and you are not covered by any

  • Crypto assets are known for their high volatility. Their prices can change rapidly, leading to significant gains or losses. It is essential to be prepared for price fluctuations.

2. Regulatory and Legal Risks:

  • The regulatory environment for crypto assets may change, affecting the legality and use of these assets in your jurisdiction. Ensure that your activities comply with applicable laws and regulations.

3. Security Risks:

  • Crypto assets are stored in digital wallets. Ensuring the security of your wallets and assets is your responsibility. Be aware of the risk of theft, hacking, and fraud.

4. Lack of Consumer Protections:

  • Unlike traditional financial systems, crypto assets may not benefit from the same level of consumer protections or insurance. You should carefully consider the custodial services and security measures in place.

5. Market Liquidity:

  • Some crypto assets may have limited market liquidity, making it challenging to buy or sell significant amounts without affecting the market price.

6. Investment Risks:

  • Investing in crypto assets involves risk. Only invest what you can afford to lose, and seek financial advice if necessary.

7. Uncertain Market Conditions:

  • Market conditions for crypto assets can be uncertain and influenced by factors such as market sentiment, news, and macroeconomic developments.

8. Technology Risks:

  • The underlying technology for crypto assets may be subject to vulnerabilities, technical failures, or security breaches.

9. Unregulated Platforms:

  • Be cautious when using crypto exchanges and platforms. Not all platforms are regulated, and they may vary in terms of security and compliance.

10. Past Performance is Not Indicative of Future Results: - Past performance of crypto assets is not indicative of future results. Historical price trends do not guarantee similar performance in the future.

11. Diversification: - Diversifying your investments can help mitigate risks. Do not concentrate your investments in a single crypto asset or asset class.

12. Do Your Own Research (DYOR): - Always conduct your own research before engaging in any crypto asset transactions. Stay informed about the latest developments and risks.

13. Seek Professional Advice: - If you are uncertain about the risks or implications of investing in crypto assets, consider seeking advice from a qualified financial advisor or legal expert.

Last updated