Crypto-asset risk summary

Estimated reading time: 2 minutes. Buying crypto-assets is a high-risk investment. Don't invest unless you're prepared to lose all the money you invest.

1. You could lose all the money you invest

The price of crypto-assets can fall to zero. Some crypto-assets and the firms that hold them have failed, and investors lost everything. Many crypto-assets have no underlying business or cash flow to support their price.

2. You are unlikely to be protected if something goes wrong

In the UK, the Financial Services Compensation Scheme (FSCS) does not cover crypto-asset investments, and you are unlikely to be able to complain to the Financial Ombudsman Service about them. Similar investor-compensation schemes in other countries usually do not cover crypto either. Registration of a crypto firm for anti-money-laundering purposes is not the same as being authorised or protected.

3. You may not be able to sell when you want to

There is no guarantee there will always be a buyer. Platforms can pause withdrawals or trading during outages, cyber-attacks, insolvency or extreme market moves.

4. Prices can move sharply in either direction

Crypto-asset prices are highly volatile and can be affected by news, social media, regulation and the actions of a small number of large holders. Using leverage or derivatives magnifies losses.

5. Crypto-assets can be complex

Make sure you understand how the asset, the platform, custody, fees and any staking or lending features work before you buy. If something sounds too good to be true, it probably is.

6. Don't put all your eggs in one basket

Spreading your money across different types of investment reduces the impact of any single one failing. A common rule of thumb is not to put more than 10% of your money into high-risk investments.

For more, see the UK FCA's guidance on crypto-assets at fca.org.uk, or your own country's financial regulator. Back to our Kraken review.

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