Learn / Beginner · Markets and Risk

Risk basics: only what you can lose

Beginner · Markets and Risk · about 5 min read

Crypto can lose value quickly, and some of the ways to lose money have nothing to do with price, so only put in money you could lose without serious harm.

Kinds of risk

• Price risk. Prices swing sharply. The FTC says there is no guarantee a price will recover after a fall.
• Provider risk. A company that holds your coins can fail. In November 2022 the exchange FTX stopped withdrawals and filed for bankruptcy.
• Scam risk. The Central Bank, the Securities and Exchange Commission and the Financial Intelligence Unit warned in 2019 that schemes promising high returns may be Ponzi schemes in disguise.
• Mistake risk. Crypto payments typically cannot be reversed, and a lost wallet can mean lost funds.
• Rules risk. Rules are still changing in Trinidad and Tobago. See Is crypto legal in Trinidad and Tobago?

Keep in mind

• Bank of England Governor Andrew Bailey said in May 2021: “Buy them only if you’re prepared to lose all your money.” That is one official’s blunt version of a common warning.
• The same 2019 warning said price swings may make virtual currencies unsuitable for most investors, and that no law protected consumers from losses.
• Nobody can promise a return. The FTC says only scammers guarantee profits.
• General information, not financial advice.

Price risk is bigger than it looks

Price charts of the past few years show falls of half or more within months. Loss arithmetic makes this worse than it sounds. If $100 falls by 50 percent it is worth $50, and it then needs a gain of 100 percent just to get back to $100. After a fall of 80 percent, it needs a gain of 400 percent. Recovery is always harder than the fall, and nobody can promise it will happen.

Risks that are not about price

Many people think of risk as the price going down. A great deal of money is lost in other ways:

• The place holding your coins fails. FTX froze withdrawals in November 2022, as the lesson on exchanges describes. Ethereum's guide notes that if a centralised exchange runs into financial trouble, funds held there are at risk.
• The "stable" coin slips. In March 2023 the dollar stablecoin USDC fell as low as about 88 cents after its issuer said part of its reserves was stuck at a failed bank. It recovered after the issuer said it would honour redemptions at one dollar. See the lesson on stablecoins.
• You send to the wrong place. Transactions cannot be reversed, so a wrong address, wrong network or a copied lookalike address can mean a total loss.
• You are tricked. The FTC lists warning signs such as guaranteed profits, pressure to act now, and unexpected contact from someone offering advice. See Scam Watch.
• The rules change. Since December 2025, Trinidad and Tobago law temporarily prohibits virtual asset business activity until 31 December 2026 unless the business is approved by the TTSEC. Read the rules lesson and ask any local business to show its approval.

Risks from your own behaviour

Some of the biggest risks come from decisions people make under pressure: buying because the price is rising and everyone is talking about it, putting in money needed for rent or school fees, borrowing to buy more, or putting everything into a single coin. None of these is a technology problem. They are habits you can notice and change, and writing down your limits before you start makes them easier to keep.

Questions to ask yourself first

• If this money went to zero, could I still pay my bills and keep my savings for emergencies?
• Do I understand how I would get it back out, and what that costs?
• If I earn in TT dollars, how does a move in the US dollar price or exchange rate affect me?
• Who is holding my coins, and what happens if they fail?
• Am I deciding because of research, or because of a message from someone I do not know?

Common mistakes

• Believing a small price today means a big gain is more likely tomorrow.
• Treating a recent rise as proof that an asset is safe.
• Following a "guaranteed return" because a friend or a social media account said it worked for them.
• Assuming a famous name, an advert or a celebrity makes something trustworthy.
• Having no plan for the day the price halves.

Try it yourself

No money needed.

1. Pick any crypto and look at its price history over a year on a price website such as CoinGecko. Find the largest fall from a peak and work out the gain needed to recover.
2. Write down five risks from this lesson and, for each, one thing you would check before putting money in.
3. Write one sentence stating the most you could lose without real harm. Keep it somewhere you can see it.

Key terms

Volatility, risk, provider risk, scam, recourse.

Sources and credits

Scam warning signs: US Federal Trade Commission. Exchange and wallet custody risk: ethereum.org, Wallets. USDC and Silicon Valley Bank, March 2023: The Block and Reuters via Kitco. Trinidad and Tobago law: TTSEC fact sheet on the 2025 Act. FTX collapse, November 2022: Reuters via Euronews and Steptoe explainer. General information, not financial advice.

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