Crypto Risk Summary
Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
You could lose all the money you invest
- 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 in cryptoassets.
- 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.
You should not expect to be protected if something goes wrong
- 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 – in other words, this type of investment isn’t recognised as the sort of investment that the FSCS can protect. Learn more by using the FSCS investment protection checker here.
- The Financial Ombudsman Service (FOS) is currently unable to consider complaints related to CryptoAsset firms, Learn more about FOS protection here.
You may not be able to sell your investment when you want to
- There is no guarantee that investments in cryptoassets can be easily sold at any given time. The ability to sell a cryptoasset depends on various factors, including the supply and demand in the market at that time.
- Operational failings such as technology outages, cyber-attacks and comingling of funds could cause unwanted delay and you may be unable to sell your cryptoassets at the time you want.
Cryptoasset investments can be complex
- Investments in cryptoassets can be complex, making it difficult to understand the risks associated with the investment.
- You should do your own research before investing. If something sounds too good to be true, it probably is.
Don’t put all your eggs in one basket
- 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 to do well.
- A good rule of thumb is not to invest more than 10% of your money in high-risk investments.
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.
Stablecoin Risks
- A stablecoin's value is meant to be constant, pegged to an asset like a fiat currency. However, should it become unlinked, or "de-pegged," from its asset, the stablecoin could lose value rapidly, resulting in potential investment losses.
- Stablecoins rely on third parties to hold and manage the reserves that support their value. If these parties become insolvent or fail in their duties, it could compromise the value of the stablecoin, affecting your investment.
- In turbulent market conditions, converting stablecoins back to the underlying asset or fiat currency could be difficult, impacting their liquidity and your ability to exit the investment.
- For UK investors, stablecoins pegged to foreign currencies (like the US dollar) can be affected by fluctuations in the exchange rate, adding a layer of currency risk to the investment.
- Investors should carefully assess these risks when considering investments, balancing the investment goals and risk tolerance.
Crypto Strategy Risk
- Investing in Crypto Strategies places significant trust in the strategist(s) to manage the portfolio effectively. Their investment decisions, reflecting their market analysis and viewpoints, can produce results markedly distinct from direct individual cryptoasset investments. If the Strategist adopts riskier or more speculative investment strategies, the investment may experience higher volatility and potential for loss.
- The collective nature of a Crypto Strategy does not shield investors from the volatile and speculative nature of the crypto market. Diversification within the Strategy may help manage some risks but does not eliminate the possibility of experiencing substantial fluctuations in investment value.
- Strategists' management includes rebalancing the cryptoassets to align with their strategic goals. The rebalances can introduce additional risk, especially if market conditions are unfavourable during the rebalance period.
- The functionality of Crypto Strategies depends on the seamless operation of technology platforms. Any technical issues, including but not limited to system outages or execution delays, can have a detrimental impact on the Strategy performance.
- The regulatory environment for cryptoassets is continuously evolving, with potential changes that could unexpectedly affect the value of your investment. Additionally, tax considerations are complex and can influence the actual returns of your investment.
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