There is no doubt about it, cryptocurrency investing is at the HIGH end of the risk scale, and for this reason we suggest that you only invest a small portion of your total investment assets into cryptocurrency.
There are a lot of different risks to consider, we’ll run through some of the key risks here but there may be others you should consider as well.
We realise that depsite these risks, there are a lot of people who would still like to invest into crypto, and so we try to reduce these risks as much as possible for our investors, however there is still a high level of risk involved and you need to be comfortable with this if you are intending to invest into cryptocurrencies.
Cryptocurrencies are a very volatile investment (meaning that the price of each cryptocurrency can go up and down very quickly, and by large amounts). It’s very possible that your investment amount may decrease in value significantly as the price of cryptocurrencies changes. We try to reduce this risk by suggesting that customers take a diversified approach (spread your money around a many different currencies) rather than putting all of your money into one currency. This means that if one currency has decreased in value a lot, you still have other currencies which may not have decreased as much.
Exchange rate risk
When we invest into crypto currencies, we start by taking your regular money (NZD, USD, AUD etc), we may then convert this to another currency (such as USD) to allow us to buy cryptocurrencies. The exchange rate between say NZD and USD can change, which will affect the value of your investments if you decided to withdraw your money. This is called Exchange rate risk.
When we buy and sell cryptocurrencies, we do this through different “Exchanges”. There is a risk that each party to any buy/sell transaction may not live up to their side of the transaction or obligations. We try to reduce this risk by using Exchanges that we believe to be more reputable.
there is a risk that one of the cryptocurrencies (and therefore the underlying company) that we have invested into does not perform as well as expected, which could affect the returns of that cryptocurrency. We try to reduce this risk by suggesting that customers take a diversified approach (spread your money around a many different currencies) rather than putting all of your money into one currency. This means that if one currency has decreased in value a lot, you still have other currencies which may not have decreased as much.
Cryptocurrencies operate in an environment with changing regulations globally. There is a risk that regulations may change and cause adverse effects on the value of crypto currency assets, or that any such change may affect our ability to provide the service we currently do. We try to manage this risk by having expert regulatory advisers within our team and as external consultants. We also try to remain current with necessary regulation and various regulatory bodies.
Cryptocurrencies need to be held somewhere, and this is usually done in a “Wallet”. There is a risk that these wallets may be hacked, and that the cryptocurrencies may be stolen. We try to manage this risk by holding the majority our client’s cryptocurrency assets offline in what is known as “cold storage”. Assets that are held offline are much less susceptible to this kind of hacking, as hackers generally use internet to hack things that are online.