Crypto risk: why regulators keep warning you could lose everything

In January 2021, Britain’s Financial Conduct Authority put it bluntly: people who invest in cryptoassets should be prepared to lose all their money. Watchdogs around the world have issued similar warnings ever since. They are not saying crypto must fail — they are saying the protections investors take for granted elsewhere are usually missing.

Volatility is the feature, not the bug

Major coins have repeatedly lost more than half of their value within months. Smaller tokens can fall to almost nothing. Anyone investing money they may need soon is taking a risk they may not be able to afford.

Where your coins are matters

Bank deposits are usually covered by a government guarantee scheme. Crypto held on an exchange generally is not. When the FTX exchange collapsed in November 2022, customers discovered how hard it can be to get funds back from a failed platform.

Scams follow every boom

• Promises of guaranteed or very high returns.
• Pressure to act quickly or recruit friends.
• “Advisers” who contact you first on social media or messaging apps.
• Requests to install software or share recovery phrases.

If you would be upset to lose the money, it is too much to put in a highly speculative asset.

If you still want exposure, keep it small, use well-established regulated platforms, and never share a wallet’s recovery phrase with anyone.