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Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more
Estimated reading time: 2 min
Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
- You could lose all the money you invest.
- The performance of most cryptoassets can be highly volatile, with their value dropping as quickly as it can rise. You should be prepared to lose all the money you invest in cryptoassets.
- The cryptoasset market is generally unregulated. There is a risk of losing money or any cryptoassets you purchase due to risks such as cyber-attacks, financial crime and firm failure.
- You should not expect to be protected if something goes wrong.
- The Financial Services Compensation Scheme (FSCS) doesn’t protect this type of investment because it’s not a ‘specified investment’ under the UK regulatory regime – in other words, this type of investment isn’t recognised as the sort of investment that the FSCS can protect. Learn more by using the FSCS investment protection checker here.
- Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA regulated firm, FOS may be able to consider it. Learn more about FOS protection here.
- You may not be able to sell your investment when you want to.
- There is no guarantee that investments in cryptoassets can be easily sold at any given time. The ability to sell a cryptoasset depends on various factors, including the supply and demand in the market at that time.
- Operational failings such as technology outages, cyber-attacks and comingling of funds could cause unwanted delay and you may be unable to sell your cryptoassets at the time you want.
- Cryptoasset investments can be complex.
- Investments in cryptoassets can be complex, making it difficult to understand the risks associated with the investment.
- You should do your own research before investing. If something sounds too good to be true, it probably is.
- Don’t put all your eggs in one basket.
- Putting all your money into a single type of investment is risky. Spreading your money across different investments makes you less dependent on any one to do well.
- A good rule of thumb is not to invest more than 10% of your money in high-risk investments.
If you are interested in learning more about how to protect yourself, visit the FCA’s website here
For further information about cryptoassets, visit the FCA’s website here
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Forbes Advisor has provided this content for educational reasons only and not to help you decide whether or not to invest in cryptocurrency. Should you decide to invest in cryptocurrency or in any other investment, you should always obtain appropriate financial advice and only invest what you can afford to lose.
Avalanche (AVAX) is a relatively new cryptocurrency. Despite only having sprung up in 2020, it has gained tremendous popularity as an alternative for Ethereum developers. Avalanche has become one of the larger cryptocurrencies, with a market cap around £5.38 Billion. Find out about buying AVAX below.
Avalanche in the digital economy
Ethereum has a few notable downsides, like high gas fees and slow transaction speeds. Avalanche was created as a highly scalable blockchain that addresses these problems. AVAX bills itself as “the fastest smart chain contracts platform in the blockchain industry.”
While Avalanche offers plenty of admirable features, some crypto users are adopting it because of its nimble structure.
AVAX supports three blockchains. One, the Contract Chain (C-Chain), is ideal for smart contracts, such as non-fungible tokens (NFTs) and decentralised applications (DApps). The C-Chain is Ethereum Virtual Machine compatible, allowing Ethereum developers to use it to deploy applications.
Users pay a subscription fee in AVAX to operate on Avalanche’s blockchain, although costs are vastly lower than Ethereum’s gas fees. Gas refers to the amount of ETH required to conduct a transaction on the Ethereum blockchain.
Another fact about Avalanche: AVAX is a capped-supply token with a maximum of 720 million tokens. Currently, there are more than 330 million tokens in circulation.
Investors can also stake their AVAX since Avalanche runs on a proof of stake consensus mechanism.
How to buy AVAX
Someone investing in Avalanche, can buy AVAX tokens in just three steps:
1. Choose a crypto exchange
Before buying AVAX, or any form of cryptocurrency, investors need to open an account with a crypto exchange. Crypto exchanges facilitate trades on their platforms, making it easy to buy and sell tokens.
Some crypto exchanges are designed for novice investors, with very simple interfaces. Others are designed for more advanced traders and include features like crypto staking. Our pick of the best crypto exchanges offer various cryptocurrencies and low trading fees.
2. Buy AVAX
Once an investor has opened an account and selected a payment method, they can make their first investment in AVAX.
They can enter the exchange’s trading platform and enter Avalanche’s ticker symbol (AVAX) and how much they want to invest. Investors can usually choose to enter a number of tokens, or opt to enter a dollar amount to invest.
They can also decide on an order type; market orders are processed right away, while limit orders only go through once the token reaches a certain price. A limit order can be a good idea if an investor expects the price to change significantly in the near future.
Those who place a market order can expect it to be processed right away, becoming a proud AVAX investor.
3. Store AVAX
With cryptocurrencies, investors should think about storage to protect their investment. AVAX can be stored in several different ways:
- Hardware wallets. A hardware wallet is a physical device that stores the private keys to an investor’s crypto assets. They look similar to flash drives, and they’re considered cold storage —they’re not automatically connected to any network or the internet. Some popular hardware wallets include Trezor and Ledger. In fact, the Ledger Nano X allows connection to any third-party wallet that supports Avalanche.
- Paper wallets. Paper wallets are exactly what they sound like: They’re printed pieces of paper with an investor’s private and public keys on them. Paper wallets tend to be less popular now that more people are investing in cryptocurrency since there is always the risk of losing the paper—and investors never being able to access their investments.
- Software wallets. Software wallets are apps or programs downloaded to an investor’s device to store their crypto assets. They are often called a “hot wallet.” While not as secure as a “cold wallet,” assets on software wallets can be accessed easily when an investor wants to trade their holdings. The Avalanche network also has its own noncustodial Avalanche Wallet for storing Avalanche assets. An investor has to key in their keystore file, private key, and recovery phase for that web wallet.
- Crypto exchanges. Crypto exchanges, such allow investors to store their crypto on platforms.
What can investors buy with AVAX
Investors can use AVAX to pay transaction fees or as a currency within the Avalanche network. Alternatively, they can simply speculate on the token’s price by buying and selling AVAX with other crypto investors.
AVAX’s price, at the time of this write, was down about 54% year over year.
If an investor decides to invest in Avalanche, they should keep in mind that the price can fluctuate wildly. For that reason, financial experts recommend that crypto investments should only make up a small portion of their overall investment portfolio.
Cryptocurrency is unregulated in the UK. The UK regulator, the Financial Conduct Authority, has repeatedly warned investors that they risk losing all their money if they buy cryptocurrency, with no possibility of compensation.
