Investing is not something that should be taken lightly, and even more so when it comes to high-risk investments like cryptoassets.
On the surface, it may be tempting to compare cryptoassets with investing in stock markets, especially since the terminology and the user interfaces can be very similar. However, cryptoasset trading carries distinct risks from the traditional regulated securities markets.
Therefore, before deciding to invest in cryptoassets, it’s paramount to do your own research and understand these risks.
⚠️ Research and due diligence
With today’s technology, it’s easy for anyone to create a new token on any one of dozens of existing blockchains, and many of them are created with the sole purpose of scamming and committing fraud.
Although Ramp conducts in-depth due diligence in line with financial regulations before adding support to an asset, this doesn’t correspond to an endorsement, recommendation, or advice for you to purchase them.
You’re still responsible for doing your own research before making a purchase. Ramp offers no guarantees of any kind about the cryptoassets we support.
💸 Difficulty in selling your assets
Cryptoasset markets are not just volatile, but also trade relatively low volumes (when compared to traditional markets such as stocks and bonds). Particularly for smaller projects or assets, there may be times when there’s very little or even no liquidity at all. This means that if you own such an asset, you may be unable to sell it and recover your investment, temporarily or permanently. This can be due to:
Lack of buyer interest in that asset
Technical issues with exchange platforms where the asset is traded
Rug pull, a type of fraud where malicious creators of a cryptoasset or liquidity pool disappear after customers invest in their fake cryptoassets
💼 Portfolio risk management
In building your crypto investment portfolio, it is generally recommended to limit your investment in cryptoassets (and other high risk investments) to 10% of your net assets. A measured approach serves as a risk management strategy and ensures your future financial well-being.
To sum it up, cryptoasset investments offer distinct features and risks compared to traditional investments. It’s paramount that you manage your portfolio responsibly, do your own research, and be aware of the potential lack of liquidity when trying to sell a crypto back into fiat currency.