How does Coinmotion assess cryptocurrency risks?
You may have noticed a notification in our service advising you to consider your investment in a specific cryptocurrency more carefully than usual. This article explains what that notification means and how we assess the risk level of cryptocurrencies.
What is this about?
Not all cryptocurrencies are created equal. Some are established and widely used, while others involve higher levels of uncertainty. We monitor the cryptocurrencies in our selection and assess their associated risks. If we determine that the risk level of a specific cryptocurrency has risen above the norm, you will see a notification in our service to help you factor this into your investment decisions.
This is not an investment recommendation. We do not tell you what to buy or sell; our goal is to ensure you have sufficient information to support your decision-making.
Furthermore, we can never guarantee that we will detect an increase in the risk level of a specific cryptocurrency. Our assessment may also be incorrect, which is why customers must always independently evaluate the risks associated with their own investments. Cryptocurrencies and investing always involve risk.
What do we monitor?
Our risk assessment is based on extensive data collection and analysis. We utilize publicly available sources, such as market data, news, and regulatory information. We monitor the following areas, among others:
- Market Data: We examine price trends, trading activity, and market capitalization. If trading volume for a specific cryptocurrency drops significantly, it may be a sign of increased risk.
- Exchange Activity: We monitor how widely a cryptocurrency can be traded across different platforms. If a major crypto exchange delists a currency, it is an important signal. If multiple exchanges do so within a short period, it is a more serious indicator.
- Regulation and Legal Matters: Cryptocurrency regulation is evolving worldwide. We track regulatory decisions and legal proceedings that could impact a specific cryptocurrency.
- Security: We monitor whether security issues or vulnerabilities have been detected in the cryptocurrency's technology.
- Project Health: We assess the health of the project behind the cryptocurrency. This includes checking if development is active, if there have been changes in key personnel, and if the project's direction is stable.
- General Market Conditions: The general direction of the crypto market affects all assets. We take this into account so that an individual cryptocurrency’s risk is not assessed in isolation. If the entire market is down, a price drop in a specific currency may not necessarily indicate problems unique to that asset.
We utilize the information available in our sources for each cryptocurrency. However, risks can always be influenced by factors beyond those we monitor.
What should you do?
If you see a notification regarding an elevated risk level, pause for a moment and consider the situation carefully. You might reflect on the following:
- How much of your total investment is in this specific cryptocurrency?
- Are you prepared for the possibility that the investment's value could drop significantly or even become worthless?
- Are you prepared for trading in this cryptocurrency to be suspended temporarily or permanently?
- Does the investment align with your personal risk profile as an investor?
We encourage every investor to research a cryptocurrency thoroughly before making an investment decision. Our risk assessment is one tool among many, but it does not replace your own due diligence.
If the risk level of a cryptocurrency remains high for an extended period, we may remove it from Coinmotion's selection entirely. In such a case, we will contact users and outline the available options regarding their investment.
Important Information: Risk Disclosure
Remember that cryptocurrencies always involve risk. Market value fluctuations can be extreme, so only invest what you are prepared to lose.
Nothing presented in our communication constitutes, nor should it be construed as, an investment recommendation or an invitation to buy or sell cryptocurrencies.
We can never guarantee that we will detect an increase in the risk level of a specific cryptocurrency, and our assessments may be incorrect.
If you have any questions, please contact our customer service.