Volatility, counterparty risk and scams

Weight decides the experience

Crypto's swings are not a flaw but a feature worth accepting in advance. You cannot remove them, but their effect on your portfolio is entirely up to you.

A useful way to think about it is a risk budget: don't ask “how much can crypto rise” but “how much does my portfolio fall if crypto falls 80 percent”. If the answer is bearable, the weight is right. If not, the weight is too large, whatever your view.

Counterparty risk is not the same as market risk

Market risk means the price falls. Counterparty risk means the assets disappear, whatever the price. The biggest losses in crypto's history have not come from falling prices but from platforms losing their customers' assets.

The difference matters because you can ride out market risk by waiting. You cannot do that with counterparty risk. The only protection against it is choosing whom you entrust your assets to, and checking how they are segregated.

The five most common scam patterns

Scams in crypto are no more ingenious than elsewhere. They are just faster, because transfers cannot be reversed. There are five recognizable signs.

A realistic role in a portfolio

Crypto does not replace a portfolio of stocks and bonds. It is a high-risk addition whose job is to bring the portfolio a source of return that does not move entirely in step with the rest, at the price of swinging more than any other part of the portfolio.

The weights are illustrative, not a recommendation. The right split depends on your goal, time horizon and risk tolerance.

This content is for information purposes only and should not be construed as investment advice or a recommendation. Investing always involves the risk of losing capital. The value of financial instruments and investments can go up or down, and past performance is no guarantee of future returns. The calculator is illustrative and is not investment advice.