What are the risks associated with cryptocurrencies? 

Price volatility 

Cryptocurrencies are notoriously volatile. Sudden and large price swings can result in significant gains, but also considerable losses for investors.  

For example, between Monday 1ᵉʳ November 2021 and Thursday 1ᵉʳ December 2022, Bitcoin lost 72% of its value. Conversely, between 1ᵉʳ October 2020 and 1ᵉʳ March 2021, Bitcoin rose by more than 400%. These examples illustrate the volatilityPrice variation of an asset on a given period. of prices in the cryptocurrency market, in either direction. 

Security risks 

Cryptocurrencies that are stored in digital wallets, known as hot wallets, can be vulnerable to cyber attacks and hacking. The walletPrice variation of an asset on a given period. is then said to be compromised. In this case, funds can be lost without any possibility of recovering them.  

For example, in 2014, the Mt. Gox exchangeExchange platform for crypto assets (Binance, Kraken…) platform suffered a major computer attack, resulting in the loss of hundreds of millions of dollars in Bitcoin. 

If you use an offline wallet, such as a paper wallet or a hardware device not connected to the Internet, there is also a risk of loss, theft or damage. The security of your wallet is essential to prevent the loss of your digital assets. The private keys used to retrieve your funds cannot be recovered by a forgotten private keyOne of the two components of a crypto wallet, it gives the digital assets’ ownership and must stay
confidential. process, as can your bank login passwords or any other internet account. The fate of your digital assets and their security is entirely up to you. 

Risks of fraud   

The cryptocurrency market is also prone to scams and rip-offs. Investors should be wary of investment offers that are too good to be true or projects promising unrealistic returns. 

For example, in 2018, the company Bitconnect was accused of setting up a Ponzi pyramid scheme, causing significant financial losses for many investors. 

Lack of liquidity 

Some cryptocurrencies can suffer from a lack of liquidity, making it difficult to buy or sell large quantities without affecting prices. Digital assets can have limited liquidity, which can make it difficult to sell or exit a position. 

Lack of regulated markets 

Unlike conventional markets, the regulation of cryptocurrency markets can vary from country to country, and this lack of strict regulation can create additional risks for investors. 

Risks associated with regulation under construction 

Regulation of cryptocurrencies is evolving rapidly and can vary from country to country.  

In France, the PACTE (Plan d’Action pour la Croissance et la Transformation des Entreprises) law, enacted in 2019, introduces a regulatory framework for digital assets. Indeed, it aims to modernise the economy and encourage the growth of Web3New web version using blockchain technology. Decentralized, by the users, for the users. businesses. It addresses the issue of crypto-assets by providing a framework for public offerings of tokens (ICOs) and digital asset service providers (DASPs). ICOs can obtain a visa from the Autorité des Marchés Financiers (AMF) after complying with certain rules and obligations. NSPs, on the other hand, must obtain registration or authorisation from the AMF in order to operate legally. The AMF is responsible for monitoring and sanctioning players who fail to comply with the regulations.  

The MiCA (Markets in Crypto-Assets) regulation is a European Union regulatory proposal aimed at regulating digital assets within the European Union. It proposes a set of rules and standards for cryptocurrency service providers, such as exchange platforms, digital wallets and issuers of digital assets. Its aim is to create a harmonised regulatory framework that protects investors, promotes innovation and ensures market integrity. 

As a result, regulatory changes may have an impact on the value and use of cryptocurrencies. 

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