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Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
1. 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.
2. 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: https://www.fscs.org.uk/check/investment-protection-checker/.
The Financial Ombudsman Service (FOS) will not be able to consider complaints related to this firm. Learn more about FOS protection here: https://www.financial-ombudsman.org.uk/consumers.
3. 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.
4. 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.
5. 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: https://www.fca.org.uk/investsmart/5-questions-ask-you-invest.
If you are interested in learning more about how to protect yourself, visit the FCA’s website here: https://www.fca.org.uk/investsmart.
For further information about cryptoassets, visit the FCA’s website here: https://www.fca.org.uk/investsmart/crypto-basics.
Different Cryptoassets Risks
Learn more about the specific risks in connection with the different types of cryptoassets: https://www.binance.com/en-GB/legal/risk-warning-types.
Additional Risk Summaries for Binance Advanced Products:
Margin
Leverage Risk: Using borrowed funds amplifies both profits and losses, making it possible to lose more than your initial investment.
Margin Calls and Liquidation: Falling below required margin levels can trigger margin calls or liquidation, leading to potential loss of assets and / or collateral.
Volatility Risk: Highly volatile crypto markets can result in rapid price swings, increasing the risk of significant losses.
Binance Launchpad
Market Volatility: Investments in Launchpad projects are subject to the volatile cryptocurrency market, which can result in rapid price fluctuations.
Project Risk: The success of Launchpad projects is not guaranteed, and some may fail to deliver on their promises or face regulatory challenges.
Allocation Risk: Securing an allocation in popular projects can be highly competitive, and not all users may receive tokens, potentially leading to missed opportunities.
OTC Spot
Market Risk: Prices of cryptoassets in the OTC market can fluctuate rapidly, leading to potential gains or losses.
Counterparty Risk: Dealing with OTC partners involves counterparty risk, where the other party may default on the trade.
Lack of Regulatory Protections: OTC trading may not offer the same regulatory protections as traditional exchanges, potentially exposing users to higher risks.
Trading Bots
Market Risk: Automated trading bot strategies inherently expose users to market volatility and potential price fluctuations in the assets being traded.
Execution Risk: The success of automated trading relies on timely execution. Delays or slippage during the execution process can impact the achievement of desired outcomes.
Algorithmic Risk: Automated trading algorithms may have limitations or vulnerabilities that could lead to unintended consequences, irrespective of the specific strategy employed.
Loss of Control: Users relinquish some control over their assets when employing automated trading strategies. This loss of control may not always align with individual preferences or adapt to changing market conditions, regardless of the specific nature of the strategy employed.