Thinking about investing? You should take extra caution when trusting someone else with your money, especially if you’re considering high-risk investments such as cryptocurrencies. Here are some things you should know.
Cryptocurrencies are highly volatile
The popularity of cryptocurrencies has grown significantly. A quick search on the internet shows stories of success that draw in newbies and enthusiasts, enticed by higher and faster returns.
Of course, the chance of a quick profit sounds exciting, but remember: cryptocurrencies are highly volatile and their prices can go up and down significantly without any warning.
For example, Bitcoin hit an all-time high of over $68,000 in November 2021, but had fallen below $35,000 by January 2022.* It means that you might lose some or all of the money you put in. If you can’t afford it, think twice before investing.
Beware of scams
Thousands of people lose millions due to online investment scams every year. The internet and advances in digital communication mean these kinds of scams happen more often and are harder to identify.
With the rise in popularity of cryptocurrencies, the crypto marketplace has become a target for scams that lure people in with “guaranteed” high returns and pressure them into acting quickly. That’s why it’s important to take your time researching an investment opportunity before handing over your money.
What to consider before you invest
Before you invest, here are some important reminders:
- If you buy cryptoassets, you should be prepared to lose some or all of your invested money.
- Cryptoassets are typically unregulated, which means you’re unlikely to be protected for financial losses.
- Be wary of deals that are too good to be true—despite promises of high or fast returns, investment scams cheat you out of money.
- Be alert to misleading advertisements on social media or offers found through search engines.
- Make sure the company you’re dealing with is legit—always check what your local regulators are saying about the business.
Remember: if the deal sounds too good to be true, then it probably is.
Action we take
To help consumers stay vigilant, we place a consumer information notice on businesses related to cryptoassets. It’s a reminder to do as much research as possible prior to engaging with investments in this industry.
If you notice anything suspicious, remember that you can let us know through our Whistleblower function.
If you want to learn more
Various authorities warn of the risks and potential harm that is directly linked to this industry. See below articles that include tips for avoiding scams. For example:
- What To Know About Cryptocurrency and Scams | Consumer Advice — US Federal Trade Commission
- How to avoid fraud — US Securities and Exchange Commission
- Online trading scams — UK Financial Conduct Authority
- EU financial regulators warn consumers on the risks of crypto-assets — European Banking Authority
- Understanding high-risk investments — Financial Conduct Authority
You can also check investment professionals and companies on the financial register in your country. For example:
- Financial Services Register in the UK
- Investor.gov in the US
- The Danish FSA’s Company Register
- Le registre des agents financiers in France