Risks of Investing in Cryptocurrency and Other Digital Assets
Updated: March 10, 2023
This is a general summary of certain risks associated with investing in digital assets, including cryptocurrencies and virtual currencies. It is for informational and educational purposes and has not been tailored for any specific investor, situation or investment. AltoIRA is not an investment advisor, financial advisor, trustee or other fiduciary, and does not provide legal, tax, investment, accounting or financial advice. By accessing Coinbase® services to buy or sell digital assets using your AltoIRA® account, you acknowledge you understand and assume the following risks.
- DIGITAL ASSET INVESTMENTS MAY LOSE ALL VALUE.
- DIGITAL ASSET INVESTMENTS SUCH AS DIGITAL CURRENCIES MAY BE SUBJECT TO LEGISLATIVE AND REGULATORY CHANGES OR ACTIONS AT THE STATE, FEDERAL, OR INTERNATIONAL LEVEL WHICH MAY ADVERSELY AFFECT THE USE, TRANSFER, EXCHANGE, AND VALUE OF DIGITAL/CRYPTO ASSETS.
- DIGITAL ASSETS AND VIRTUAL CURRENCIES ARE NOT LEGAL TENDER, ARE NOT BACKED BY THE GOVERNMENT, AND ACCOUNTS AND VALUE BALANCES ARE NOT SUBJECT TO FEDERAL DEPOSIT INSURANCE CORPORATION OR SECURITIES INVESTOR PROTECTION CORPORATION PROTECTIONS.
- ANY BOND OR TRUST ACCOUNT MAINTAINED BY COINBASE FOR THE BENEFIT OF CUSTOMERS MAY NOT BE SUFFICIENT TO COVER ALL LOSSES INCURRED BY CUSTOMERS.
- An investment in digital assets should be made using discretionary capital set aside strictly for speculative purposes.
- An investment in digital assets is not suitable or desirable for all investors.
- Digital asset exchanges have limited operating and performance histories.
- Fees and expenses associated with digital asset transactions may be substantial.
- Digital assets markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. There is no assurance that a person who accepts a digital asset as payment today will continue to do so in the future.
- Investors should conduct extensive research into the legitimacy of each individual digital asset and exchange before investing. The features, functions, characteristics, operation, use and other properties of the specific digital asset may be complex, technical, or difficult to understand or evaluate. The digital asset may be vulnerable to attacks on the security, integrity or operation, including attacks using computing power sufficient to overwhelm the normal operation of the digital asset’s blockchain or other underlying technology. Some digital asset transactions will be deemed to be made when recorded on a public ledger, which is not necessarily the date or time that a transaction may have been initiated.
- Digital asset trading requires knowledge of digital asset markets. In attempting to profit through digital asset trading you must compete with traders worldwide. You should have appropriate knowledge and experience before engaging in substantial digital asset trading.
- Under certain market conditions, investors may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular digital asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying digital asset system.
- The greater the volatility of a particular digital asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, investors may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, fraud, cyber attack and data corruption.
- Transactions in digital asset investments may be irreversible, and, accordingly, losses due to fraudulent or accidental transactions may not be recoverable.
- Digital asset transactions are deemed to be made when recorded on a public ledger, which is not necessarily the date or time that the customer initiates the transaction.
- The value of digital asset investments may be derived from the continued willingness of market participants to exchange fiat currency for digital/crypto assets, which may result in the potential for permanent and total loss of value of digital assets should the market for digital assets disappear.
- There is no assurance that a person who accepts digital assets as payment today will continue to do so in the future.
- The volatility and unpredictability of the price of digital asset investments relative to fiat currency may result in significant or total loss over a short period of time.
- The nature of digital asset investments may lead to an increased risk of fraud or cyber-attack; and the nature of digital assets means that any technological difficulties experienced by third parties may prevent access to or use of digital assets held for my account.
- The Internal Revenue Service has neither approved nor disapproved of the use of an omnibus digital asset wallet for custody of digital assets for the benefit of AltoIRA accounts, and any ruling that such assets are not maintained in compliance with the Internal Revenue Code may result in a distribution from my account or other adverse tax consequences.
- Additional disclosures, depending on your state of residence, are provided by Coinbase here.