Bitcoin & Cryptocurrency Risk Warning – Please Read

Last updated: 21st January 2020

While Bitcoin and other cryptocurrencies are unregulated at present, it’s ability to be spent on goods and services like money, and be traded like a commodity makes it a curious thing. From personal experience with a small amount of bitcoin, it is very easy to make as well as lose your bitcoin in an instant, whether through a misunderstanding of how wallets work, sending bitcoin to the wrong address, losing it with a third party, or bad bad trading choices. So as is best practice around the advertising and promotion of financial products, Please read this this plain English risk warning.

Before you start, read the official consumer warning from the European Central Bank about Bitcoin (from 2013).

Risk warning for normal bitcoin users/consumers
Bitcoin is a relatively anonymous electronic currency-like thingie which is bedding into the internet as a way to send an equivalent value of money, anywhere in the world to another bitcoin user, without going through the financial system. If you have bitcoin, the euro equivalent (fiat) value will fluctuate all over the place. When purchasing through a website, it will usually “lock down” a price and give you some time to send a transaction. While the transaction flashes across the internet quickly, the bitcoin network will need to confirm it several times before the payment at the other end is released to the merchant. So unlike money, there is a bit of a time lag, but this is normal enough. It can vary from less than an hour to several hours, depending on how quickly blocks are being mined. While most companies offering bitcoin are normal trading companies, and their goods and services covered by normal consumer law, it is a wild west out there on the internet, so remember Caveat Emptor and use your head. If it seems dodgy and feels dodgy, it probably is. So a little research about any product or service you choose is essential before spending for reviews can help you. Do they have contact details or are they completely anonymous? Are they offering ridiculous things to you, in return for you sending them some of your hard earned bitcoin? But once informed and armed with your bitcoins, you can shop at an increasing number of online stores, with no sign of it slowing down.

Risk warning for bitcoin gamblers
There are many unregulated or unlicensed bitcoin gambling operations online, based in far flung places. If you do choose to gamble, only gamble what you can afford to lose completely. Remember the house always wins, and while many sites are or claim to be “provably fair”, you’ll still probably lose it to the house. Bitcoin’s anonymous nature also can be a way to hide a gambling problem showing up on a credit card, so if you feel like you are having a problem, please pause, ask yourself if it’s getting out of hand, or visit http://gambleaware.ie/ to find out how to deal with problem gambling. Any credible operator should honour a request asking them to close your account if it is in relation to this. Bitcoin gambling is a bit of fun, but it’s still monopoly money, not real cash in the Irish law, and you can’t buy a pint of milk with it, and it’s definitely not worth losing your house, job or relationship over.

Risk warning for bitcoin sellers
If you are selling bitcoins to a third party or exchange, be very careful about what payment methods you accept. Any transaction done with paypal, credit cards, debit cards or other reversible payment systems carry huge risk, unless you trust the person and/or they are personally known to you. There are many cases of people who have entered into an agreement to sell bitcoin to someone online, who has sent the payment by paypal first, receive the bitcoins, and then chargeback the payment. This can leave you out of pocket of your bitcoins and money. So do your homework when selling, and don’t leave yourself open to this. Also do your own research on any exchanges or trading software you choose to use.

Risk warning for bitcoin investors
The exact same risk with any regulated financial instrument such as shares or derivatives. Bitcoin trading comes with highrisk of losing your invested capital, up to and including a total loss. Bitcoin values can fluctuate all over the place, and it’s not uncommon for the value to swing by 25% in response to macro-economic factors. You have none of the fallback options that other products have, so trade carefully with a fund that you can afford to lose completely, if all goes to hell. Bitcoins are not suitable for all investors. Make sure that you fully understand the risks, capital gains tax liabilities and other concerns about working with Bitcoin. Also, unlike other things which have can fluctuate in some sort of coherent pattern, previous history has completely no impact on what’s going to happen next. A huge amount of bots and humans are making decisions across the world, and a price fluctuation to one exchange can rapidly cause others to follow suit. Arbitrage is also difficult unless you have money on several exchanges, as the network transmission speed can mean lodging funds into or out of exchanges can let you miss the boat. Finally, security around your bitcoin keys is very important. Be wary of online services, and with wallets that don’t let you control your keys. We recommend using a suitable hardware, physical or paper wallet backup, and if doing a paper backup make sure to laminate it to ensure that it stands the test of time.

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