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What are the risks associated with crypto investment ?
What are the risks associated with crypto investment ?
Florimon Giacobi avatar
Written by Florimon Giacobi
Updated over a week ago

Crypto investing represents an opportunity, nevertheless high potential returns come with higher risks.

Finary prioritizes transparency, so here's a non-exhaustive list of the main risks you may encounter when investing in crypto:

Risk of capital loss

Crypto prices constantly fluctuate according to the relative amounts of demand for buying and selling on marketplaces. As cryptos are particularly volatile, there is a risk of losing the entire capital invested.

Volatility risks

The value of cryptos can fluctuate rapidly. Finary users are warned to take care with their crypto exposure and that their exposure may be potentially impacted by sudden and unpredictable changes that would impact their crypto portfolio.

Risks intrinsic to cryptos

The following is a list of the many risks inherent in the use of cryptos:

  • Risk of hacking a digital asset blockchain ;

  • Risks inherent in cryptos, such as coding errors, counterparty risk, etc.

  • Risk of hacking a digital asset market platform ;

  • Risk of access problems of any kind between Finary and the crypto partner market platform used, including loss of internet connection ;

  • Risk of temporary or permanent shutdown of a digital asset market platform ;

  • Legal and regulatory risks in one or more jurisdictions, relating to the purchase, sale, retention or exchange of digital assets ;

  • Unforeseen risks due to the youth and experimental nature of the technologies used.

Yield-related risks

  • Counterparty/default risk : the third party borrowing the crypto may default and not repay the loan ;

  • Liquidity risk : the cryptos staked or loaned are blocked for the time it takes to validate the blockchain transactions or the loan ;

  • Transaction risk : depositing cryptos for staking or lending may put these cryptos at risk.

These are the main risks when investing in crypto, and it's also important to remember that "Past performance is not a guide to future performance" so any returns or performance exhibited are primarily an indicator, but are by no means guarantees.

How can investing with Finary reduce these risks?

  • Finary is a French company, registered as a PSAN (Prestataire de Services sur Actifs Numériques) with the AMF (Autorité des Marchés Financiers) ;

  • Finary works with recognized partners (such as Bitstamp) and offers only the most solid and proven cryptos on the market ;

  • Finary offers sensible yield solutions (lending and staking), and does not expose itself to particularly risky or exotic counterparties.

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