Investment risks.

Risks associated with investments.

Investment in the stock market involves taking risks. Investors accept this risk every time they risk some of their capital with the hope of making a profit. Sometimes you win, sometimes you lose, but the better you understand the risks you face as an investor - the more effectively you will be able to protect yourself. Here's a look at the basic risks associated with investing. Issuers of crypto-assets are mainly companies therefore we present risks related to the activities of companies however, they are also appropriately applicable to business activities conducted by individuals.

Unsystematic risk.

Unsystematic risk (otherwise known as specific risk) is the risk associated with investments in the assets of a specific company. When you buy the assets of a particular company, your fate, as it were, depends on the success of the company. If you bought, and the company is successful - you should profit from the transaction. Conversely, when the company goes through a crisis, you must be prepared for a probable loss on your investment. Many factors affect a company's performance, and you have to accept the fact that any one of them can backfire on your investment. Below you will find a list of basic unsystematic risk factors: Unexpectedly low profits Lawsuits Scandals in which the company is involved Outdated technology Labor strikes

Credit risk / bankruptcy risk.

Credit risk is the fact that a company whose assets you own may have trouble paying its obligations. Thus, it becomes insolvent and may withhold repayment of its debts to bondholders. Insolvency can be the result of deteriorating credit conditions, corporate fraud, or other financial troubles for the company. Regardless of the cause of insolvency, the company loses its ability to function effectively. Capital, after all, is the main engine of any company. When owning cryptocurrency, you are not directly affected by the company's insolvency, as you do not own the debt instruments. However, the company's problems are reflected in the prices of its assets, due to the fact that investors begin to sell them out of their portfolios, causing their prices to fall. Exchange rate risk. Exchange rate risk occurs when investors buy assets in a currency other than the currency of their country of origin. Exchange rates rise and fall just like stock prices. If the investment's currency appreciates against the currency of the investor's country, his investment will also gain in value. In contrast, if the home currency strengthens, the value of the investment will fall. Often there is an extreme case when the entire profit made on a position will be wiped out by an unfavorable change in the exchange rate. Interest rate risk. Central banks like the National Bank of Poland or the European Central Bank have a huge influence on financial markets through interest rate decisions. Generally, when the central bank raises interest rates, borrowing costs increase and the company may have trouble borrowing for its development investments. This, in turn, negatively affects the company's future growth prospects and can cause the price of its crypto assets to fall. In contrast, when central banks lower interest rates, borrowing costs fall and companies find it easier to obtain sources of financing. As a result, the company's future growth prospects improve the value of its assets increases.

Political risk.

Political risk is related to the fact that the political situation in a country may change to the detriment of the economy and investments. On the one hand, a company whose assets you own may be nationalized by the government, causing a loss for token holders. On the other hand, political risk can be associated with tax reform, either by increasing corporate income taxes or by introducing various types of duties or excises that reduce a company's profitability. This causes the investment climate to deteriorate and asset values to fall.