Presentation of the risks related to crypto-assets
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Découvrez les risques liés aux crypto-actifs
Crypto-assets and the underlying technologies such as Blockchain are relatively new and sometimes not well known by the general public. Investing in crypto-assets therefore requires knowledge of their main characteristics as well as the risks involved.
At Coinhouse, we are committed to making this new asset class accessible to everyone, but also to allow everyone to be fully informed of the risks associated with it.
This page is intended to help you understand it better.
The risk of volatility and capital loss
This is by far the most well-known risk associated with crypto-assets: their value can vary, both up and down.
On the crypto market, which is still very young, this risk is very important: the value of a crypto-asset can suddenly rise or fall! The investor can thus suffer total or partial capital losses.
To limit this risk, it is possible to position all or part of his portfolio on stablecoins. These are crypto-assets whose objective is to replicate the value of a fiduciary currency (dollar, euro…).
Liquidity is simply the ability to buy or sell assets quickly in a given market. Insufficient liquidity results in a market that is too small where it is difficult to conduct transactions due to lack of participants.
In the crypto market, it is important to distinguish between highly capitalized crypto-assets (whose overall value exceeds several billion euros), such as bitcoin, and thinly capitalized crypto-assets, such as projects that are not listed in CoinMarketCap top 100.
In the first case, the market has a large number of buyers and sellers, and the total value of bitcoins in circulation is high. This helps to absorb the total volume of transactions.
On the other hand, in the second case, a thinly capitalized asset can experience liquidity problems. To reduce this risk, our experts continuously analyze the market and select the most liquid and promising crypto-assets in advance.
The technological risk
Crypto-assets are based on blockchains – registers Crypto-assets are based on blockchains – distributed registers between network participants – and sometimes smart-contracts, which are applications running on blockchains.
These technologies are extremely new and constantly evolving. They are not immune to design flaws, failures or potential flaws that can be exploited by malicious users.
Of course, some blockchains are extremely resilient: Bitcoin, for example, has not suffered a failure or successful hack since its launch in 2009.
In addition, at Coinhouse, our experts select upstream crypto-assets that are part of the strongest projects, and whose technological risk is reduced.
The non-application of guarantees from traditional finance
Since 1999, there is a guarantee applicable to all licensed credit institutions. It is the guarantee of deposits and securities.
According to this system, depositors’ deposits (current accounts, bankbooks, home savings, etc.) are guaranteed up to a ceiling of €100,000 in case of bankruptcy of the credit institution.
As you can see, Coinhouse is not a credit institution, but a Digital Asset Service Provider (DAP). Crypto-assets are stored on wallets, not on demand deposit accounts. Therefore, the deposit and securities guarantee does not apply to crypto-assets.
Please note that this list of risks is not exhaustive and that there are a number of other residual risks.