Risk Associated with Cryptoassets

Extreme Price Fluctuations

Many cryptoassets suffer from sudden and extreme price fluctuations and are speculative in nature, as their price is often based solely on consumer demand (i.e.. there may be no asset backing the project or other tangible value).You can lose a large amount of money or even all the money you have invested. Extreme price fluctuations also make many cryptoassets unsuitable as a store of value or as a medium of exchange or payment.

Misleading Information

Some cryptoassets and related products are advertised to the public in an aggressive manner, using marketing material and other information that may be unclear, incomplete. inaccurate or even deliberately misleading.

For example, social media advertising may be very brief and focus only on the potential gains and not on the high risks. You should also be wary of social media influencers who typically receive a financial incentive to market certain cryptoassets and related products and services, so their communications may be biased.

Fraud And Malicious Activity

There are numerous fake cryptoassets and scams whose sole purpose is to deprive you of your money through the use of various techniques, such as phishing.

Product complexity

Some products offering exposure to cryptoassets are very complex and sometimes have features that can increase the magnitude of losses if adverse price fluctuations occur. Given their complexity, these products are not suitable for many consumers.

Lack of Protection

Most cryptoassets and the sale of related products or services are not regulated in most jurisdictions. In these cases, you will not enjoy the rights and protections available to consumers of regulated financial services, such as complaint or redress mechanisms.

Market Manipulation, Lack of Price Transparency and Poor Liquidity

The pricing of cryptoassets and the execution of transactions on the platforms are often not transparent. In addition, the holding of certain cryptoassets is highly concentrated, which may affect prices or liquidity. Therefore, you may not get a fair price or deal when buying or selling cryptoassets, or you may not be able to sell your cryptoassets as quickly as you would like in the absence of a potential buyer. Market manipulation has been reported on multiple occasions.

Cyber-attacks, Operational Risks and Security Issues

The distributed ledger technology that underpins cryptoassets carries specific risks. Several cryptoassets issuers and service providers, in particular crypto asset exchanges and e-wallet providers, have suffered cyber-attacks and serious operational problems. Many consumers have lost their cryptoassets or suffered losses due to such attacks and service disruptions or lost the private keys with which they access their assets.