There are several risks associated with virtual/crypto-assets and their trading. By accessing and using the Services, you hereby acknowledge and affirm that you have thoroughly reviewed the following Virtual/Crypto-assets Risk Disclosures.
1. Unique Features of Virtual/Crypto-assets
Virtual/crypto-assets are not recognized as legal tender in most jurisdictions, including India, and possess no intrinsic value. The pricing of virtual/crypto-assets is determined by the agreement between parties involved in a transaction, which may or may not align with the market value of the virtual/crypto-asset at the time of the transaction.
2. Price Volatility
The price of a virtual/crypto-asset is based on its perceived value and is susceptible to fluctuations based on external factors beyond the control of any individual entity. These products are characterized by high volatility, with certain virtual/crypto-assets experiencing daily price swings exceeding 20%. Consequently, holding virtual/crypto-assets entails significant volatility risk, potentially resulting in substantial losses for holders.
3. Market Manipulation, Valuation, and Liquidity
Virtual/crypto-assets can be traded through privately negotiated transactions and numerous virtual/crypto-asset exchanges and intermediaries worldwide, each with its own pricing mechanism and order book. The lack of a centralized pricing source poses challenges for valuation. Additionally, certain virtual/crypto-assets may have concentrated holdings, affecting their prices and liquidity. As a result, buyers and sellers of virtual/crypto-assets may not receive fair treatment or prices, and liquidity dispersion can create challenges for exiting positions, particularly during stressful periods. Instances of market manipulation have been reported on multiple occasions.
The use of virtual/crypto-assets and related "wallets" exposes market participants to cybersecurity risks, including vulnerabilities to hacking and the possibility that publicly distributed ledgers may not be immutable. A cybersecurity event could lead to significant and irreversible losses for individuals trading virtual/crypto-assets. Even a minor cybersecurity incident within the virtual/crypto-asset sphere could exert downward price pressure on the affected product and potentially impact other virtual/crypto-assets.
5. Virtual/Crypto-asset Exchanges, Intermediaries, and Custodians
Virtual/crypto-asset exchanges, intermediaries, custodians, and vendors facilitating virtual/crypto-asset transactions are relatively new and largely unregulated in most jurisdictions. The lack of regulatory oversight raises the risk that a virtual/crypto-asset exchange may not hold sufficient virtual/crypto-assets and funds to meet its obligations, and identifying such deficiencies may prove challenging. Moreover, these exchanges are susceptible to significant outages, downtime, transaction processing delays, and flash crashes, resulting in higher operational risk compared to regulated futures or securities exchanges. Determining the issuer of a virtual/crypto-asset, the trading platform, wallet provider, or intermediary, especially in cross-border situations, can be difficult, making it challenging to ascertain applicable laws or enforce claims against them.
6. Regulatory Landscape
Most virtual/crypto-assets and products or services associated with them remain unregulated, depriving users of the rights and protections available to consumers of regulated financial services, such as complaint or recourse mechanisms. The regulatory environment for virtual/crypto-assets remains uncertain in many jurisdictions, and some international state securities regulators caution that numerous initial coin offerings may be classified as securities and subject to their respective securities laws. Consequently, future laws, regulations, or directives may impact the price and acceptance of virtual/crypto-assets by users, merchants, and service providers.
The relatively new and rapidly evolving technology underlying virtual/crypto-assets introduces unique risks. Accessing, using, or transferring a virtual/crypto-asset on a blockchain or distributed ledger requires a unique private key. The loss, theft, or destruction of this private key may result in an irreversible loss of the associated virtual/crypto-asset. Additionally, the ability to participate in forks could have implications for investors, particularly if an exchange does not allow participation in a fork creating a new product.
8. Transaction Fees
Many virtual/crypto-assets allow market participants to offer fees to miners (parties that process transactions and record them on a blockchain or distributed ledger). While not mandatory, these fees are generally necessary to ensure prompt transaction recording. The amounts of these fees are subject to market forces, and during periods of stress, they may increase substantially. Virtual/crypto-asset exchanges, wallet providers, and other custodians may charge high fees relative to custodians in other financial markets.
9. Risk of Partial or Total Loss of the Invested Amount
Investing in virtual/crypto-assets is typically unregulated in most countries, thereby offering limited protection in case of adverse events. Moreover, the associated risks may not be clearly stated in the documentation provided by the virtual/crypto-asset issuer.
10. Insufficient Information
Information about specific virtual/crypto-assets may be missing, inaccurate, incomplete, and unclear regarding the project and its risks. Documentation may be highly technical and require sophisticated knowledge to comprehend the characteristics of the virtual/crypto-asset and/or the project.
11. Misleading Information
Certain virtual/crypto-assets and related products are aggressively advertised to the public through marketing materials and information that may be unclear, incomplete, inaccurate, or intentionally misleading. For instance, advertisements on social media platforms may focus on potential gains without adequately highlighting the high risks involved. Caution should be exercised concerning social media "influencers" who may have a financial incentive to promote specific virtual/crypto-assets and related products and services, potentially leading to biased communications.
12. Fraud and Malicious Activities
Numerous fake virtual/crypto-assets and scams exist, aiming to deceive individuals and deprive them of their funds using various techniques, including phishing or fake identification.
13. No Personal Advice
We do not provide personal advice in relation to our products or services. We sometimes provide factual information, information about transaction procedures, and information about potential risks. However, any decision to use our products or services is made by you. No communication or information provided to you by us is intended as or shall be considered or construed as, investment advice, financial advice, trading advice, or any other sort of advice. You are solely responsible for determining whether any investment, investment strategy, or related transaction is appropriate for you according to your personal investment objectives, financial circumstances, and risk tolerance.
14. No Monitoring
We do not monitor whether your use of Density Services is consistent with your financial goals and objectives. It is up to you to assess whether your financial resources are adequate for your financial activity with us, and to your risk appetite in the products and services you use.
15. Liquidity risk
Digital Assets may have limited liquidity which may make it difficult or impossible for you to sell or exit a position when you wish to do so. This may occur at any time, including at times of rapid price movements.
Digital asset prices are subject to high market risks and price volatility. The value of your investments can go up or down and you may not get back the amount invested. You are solely responsible for your investment decisions and Density is not liable for any losses you may incur. You should carefully consider your investment experience, financial situation, investment objectives and risk tolerance and consult an independent financial advisor prior to making any investment.
Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. For any queries write to us at email@example.com.