Appendix: Non-exhaustive list of risks of investing in crypto-assets.
The risk of regulatory change
To date, the crypto-asset market is, by nature, an international market, operating in a non-harmonized European regulatory framework. In this context, not all crypto-asset investment services offered by Summit Gravity are subject to obtaining mandatory registration or approval.As such, the client is aware that he/she does not benefit from the similar protections offered to persons investing in "traditional" financial instruments such as banking and financial providers regulated by European law. The client acknowledges that he/she understands and is aware that the crypto-asset markets are decentralized and partially or not regulated.
The risk of partial or total loss of your capital
The crypto asset ecosystem offers a myriad of new opportunities that come with challenges and risks. This still unstable ecosystem is not immune to further episodes of turbulence and uncertainty in a still very changeable market.
Despite the rigorous analysis carried out by our teams and the full attention given to the study of the files before each investment, Summit Gravity cannot guarantee a return on investment.
The investment in crypto-assets is made in the context of a very volatile and extremely risky market. The amount of the initial investment made by the Investor is therefore not guaranteed.
Before investing, the client ensures that he has the necessary financial resources to bear the risk of total or partial loss of his capital.
By definition, an investor's liquidity risk is the risk of not finding an available counterparty at the market price to complete a transaction. This difficulty is likely to arise when selling crypto-assets on the market. This problem will be even greater if the size of the position is large and the volumes traded are low at the time of the sale.
The investor could then find himself forced to accept a devalued price in order to liquidate a position more quickly or, in an extreme case, find himself unable to resell his position, in the event of a particularly small or non-existent market.
Market risk is the risk of loss resulting from changes in the market value of a portfolio of financial assets. These losses arise from fluctuations in the price of the assets comprising a portfolio of financial instruments.
There are two factors to consider when assessing risk: the exposure of the portfolio and the uncertainty of the market in which the instruments are held. The investor is exposed to a major risk in the event of an unfavorable market development, where a loss could be realized instead of the expected profit.
In the specific context of crypto-assets, investing remains a high-risk investment, as transparency and oversight arrangements are still insufficient or sometimes difficult to implement on certain parts of the blockchain.
Moreover, in the past few years, half of the crypto-assets listed on various exchanges have disappeared in one way or another, presenting zero trading volumes or simply because the initiators of a project abandoned the project in the middle of the road.
On the other hand, some crypto-assets have been created exclusively for speculation or even fraud.
Volatility is a measure of the instability of an asset's price in a given market. When the price fluctuates over a wide range of values or when the variations are inconsistent, it is called instability or volatility of the security. Volatility represents the magnitude of the asset's change over time.
Volatility depends on several factors, such as limited liquidity, the nature of a market or market sentiment in a specific period. Each buying or selling action can cause the price of an asset to rise or fall sharply.
Volatility is measured using a statistical indicator called the standard deviation. It is expressed as a percentage. If the price of a product varies a lot, the standard deviation increases. Thus, the uncertainty about whether the product can be sold at a profit or a loss increases.
The lower the volatility of an investment, the lower or more moderate the risk of losing money. The higher the volatility, the greater the risk of fluctuation and therefore the greater the associated losses or gains.
The crypto-asset market is characterized by particularly high volatility.
The technological risk
While the benefits of blockchain are undeniable in terms of transparency, data traceability, flexibility and deployment of a new technology, its security vulnerabilities cannot be ignored. New processes are being developed every day to address these gaps and failures, and to strengthen security measures. But there is still a long way to go before the blockchain ecosystem is fully protected from the actions of malicious criminals.
The risks associated with technology are numerous. Among them, the hardware and software vulnerability of the exchange platforms, the vulnerability due to the lack of vigilance or training of the end-users, the attacks against the users (identity theft, malware, phishing, etc.), the lack of knowledge of the users of the importance of strong passwords and of the protection by an active management of the own private keys.
Despite the IT and human resources deployed to follow predetermined cybersecurity practices, and to best protect the network and storage elements of crypto-assets, the likelihood of such vulnerabilities cannot be ignored and underestimated.
The risk of piracy
The market value of total crypto-assets in circulation has increased 10-fold between the beginning of 2020 and the end of 2021. Such a boom in the use of crypto-assets becomes an attractive source for hacking that could result in thefts of funds placed on platforms or wallets, despite the implementation of significant security measures.
So far, such incidents have not had a significant effect on the stability of the crypto asset financial system. However, as crypto-assets become more democratic, the potential impact on the broader economy and investors may increase.
Therefore, we invite our customers to pay special attention to the use of advanced controls (strong passwords, use of 2FA, etc.) on their wallets.