Last Modified: 15 November 2024
Due to the potential for risk and for losses, the Financial Conduct Authority (FCA) considers many crypto investments to be high risk.
What are the key risks?
Volatile and unpredictable
Seeing the long-term potential in crypto is one thing but trying to put a value on them is another. Crypto prices can move suddenly with no warning – often more so than conventional assets like shares and bonds that are more widely held by investors - on the back of high-profile social media posts, or company or government-level announcements on crypto policies. Influencers may have been paid to promote a certain crypto on social media, whether the value is high or low. The price of many cryptos is primarily driven by whether other people are buying it, and therefore a post from an influencer can have a huge impact upon the price.
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) will not be able to consider complaints related to this firm. Learn more about FOS protection.
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.
For further information about cryptoassets, visit the (FCA’s website)[https://www.fca.org.uk/investsmart/crypto-basics]