⏱️ Estimated Reading Time: 2 min
⚠️ Important Regulatory Notice: Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
1. You could lose all the money you invest
Volatility: The performance of most cryptoassets can be highly volatile, with their value dropping as quickly as it can rise. You should be prepared to lose all the money you invest.
Unregulated Market: The cryptoasset market is largely unregulated. There is a risk of losing money or any cryptoassets you purchase due to risks such as cyber-attacks, financial crime, and firm failure.
2. You should not expect to be protected if something goes wrong
-
No FSCS Protection: The Financial Services Compensation Scheme (FSCS) doesn’t protect this type of investment because it’s not a ‘specified investment’ under the UK regulatory regime.
Action: Learn more by using the FSCS investment protection checker here.
-
No FOS Protection: The Financial Ombudsman Service (FOS) will not be able to consider complaints related to this firm.
Action: Learn more about FOS protection here.
3. You may not be able to sell your investment when you want to
Market Liquidity: There is no guarantee that investments in cryptoassets can be easily sold at any given time. The ability to sell depends on supply and demand in the market at that moment.
Operational Failures: Technology outages, cyber-attacks, and comingling of funds could cause unwanted delays, meaning you may be unable to sell your cryptoassets at the time you want.
4. Cryptoasset investments can be complex
Understanding Risk: Investments in cryptoassets can be complex, making it difficult to fully understand the risks associated with the investment.
Do Your Research: You should do your own research before investing. If something sounds too good to be true, it probably is.
5. Don’t put all your eggs in one basket
Diversification: Putting all your money into a single type of investment is risky. Spreading your money across different investments makes you less dependent on any one asset to do well.
The 10% Rule: A good rule of thumb is not to invest more than 10% of your money in high-risk investments.
📚 Further Resources
If you are interested in learning more about how to protect yourself, visit the FCA’s website here.
For further information about cryptoassets, visit the FCA’s website here.
⚖️ The Risks of Different Cryptoassets
Remember, not all cryptoassets are similar.
Before investing, you should ensure you understand the specific risks involved with the specific coin or token you are choosing. To get a better understanding of the key risks of some of the main categories of cryptoassets, please check the following page: