CRYPTO-ASSET FUNDAMENTALS

Understand the asset before considering the opportunity.

Crypto-assets combine new technology with substantial volatility, custody, fraud and regulatory risk.

WHAT A CRYPTO-ASSET IS

A digitally represented asset recorded through distributed systems.

Some crypto-assets are intended as payment tokens, some provide access to a network and others represent governance or financial claims. Similar technology does not make their rights, economics or risks identical.

Ownership is typically controlled through cryptographic credentials. Losing or exposing those credentials can make recovery difficult or impossible.

Tokens differ

Supply, utility, governance, issuer involvement and market depth vary widely.

Networks matter

Fees, confirmation, software changes and validator behaviour affect use.

Control matters

Custody arrangements determine who holds keys and how access is recovered.

WHY PEOPLE CONSIDER IT

Potential uses do not eliminate the trade-offs.

People may consider crypto-assets for portfolio diversification, network participation, cross-border transfer or exposure to emerging infrastructure.

Continuous global markets

Trading can occur around the clock, which also means prices can move while you are not monitoring them.

Different return drivers

Adoption, network use and token economics can differ from traditional securities, but correlations can rise during stress.

Portfolio allocation

A limited allocation may diversify some portfolios, while concentration can increase total volatility.

RISKS TO ASSESS

Loss can be substantial or total.

  1. 01

    Volatility

    Prices can change sharply with little warning and may not recover.

  2. 02

    Custody

    An exchange, custodian or self-managed wallet can fail or be compromised.

  3. 03

    Fraud

    Impersonation, false tokens, manipulated markets and irreversible transfers are common threats.

  4. 04

    Regulatory change

    Availability, reporting, tax and permitted activity can change across jurisdictions.

Canadian protection context

Cash deposits held with a CDIC member institution may be eligible for CDIC protection, subject to its rules and limits. Eligible securities held by a CIPF member investment dealer may be protected if that dealer becomes insolvent, subject to CIPF terms. Crypto-assets and many digital assets are generally not covered by CDIC or CIPF.

Questions before investing

  • What rights and practical use does the asset asset provide?
  • Who controls development, supply and material decisions?
  • Where is it traded and how deep is the market?
  • Who holds the keys and what happens if access is lost?
  • Can you afford a complete loss without affecting essential goals?

Use information, not urgency

Do not make a decision because of a countdown, celebrity, unsolicited message or promised result. Read primary documents, consider independent advice and verify the service provider.

YOUR NEXT STEP

Build a more considered investment plan.

Request access to review available tools, eligibility and onboarding with a Corvenhall specialist.

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