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Cryptocurrency Investments: Things to Consider

Cryptocurrencies are a hot trend that can impact your financial health in both positive and negative ways. Understanding the risks and rewards of investing in the crypto market is important before putting your money into it. Here’s what you should know.

A hand holding bitcoin graphic

A New Currency

Cryptocurrency is a digital currency that uses cryptography for security, making it difficult to counterfeit. When you invest in cryptocurrency, you’re buying a digital asset that you can trade or sell on a cryptocurrency exchange. A defining feature of cryptocurrencies is that they aren’t issued by any central authority, making them theoretically immune to government interference or manipulation.

Capitalizing on a Hot Trend

Here are a few reasons why cryptocurrency is an attractive investment option:

  • Potential high returns. Some early investors in cryptocurrencies have seen incredible gains, often outperforming traditional investments like stocks and bonds.

  • Diversification. Cryptocurrencies offer an additional asset class for diversifying investment portfolios, reducing overall risk.

  • Financial freedom. For some, successful crypto investments have provided financial independence and opportunities for debt repayment.

Potential Risks of Cryptocurrency Investments

Cryptocurrency investing is a high-risk investment. Some risks include:

  • Volatility. Cryptocurrencies are notorious for their extreme price volatility. The value of cryptocurrencies like Bitcoin and Ethereum can fluctuate dramatically and lead to losses that can cause personal financial stress, including having to consider filing a bankruptcy or proposal.

  • Regulatory uncertainty. Cryptocurrency regulations vary by country and are still evolving. Changes in regulations can impact the legality and taxation of crypto investments.

  • Lack of protection. Unlike traditional financial systems, cryptocurrencies offer limited consumer protections. There’s no guarantee your investment is protected if something goes wrong. Additionally, crypto assets are not exempt from seizure under the Bankruptcy and Insolvency Act. This means if you go bankrupt, your cryptocurrency will become part of the assets, which will be realized on by the LIT. Conversely, an RRSP is exempt and cannot be realized on for any contributions made more than a year before bankruptcy.

  • Speculative nature. Many cryptocurrencies lack intrinsic value, and their prices are often driven by speculation rather than fundamentals.

  • Hacking. Cryptocurrencies are stored in digital wallets, which can be hacked. If your wallet is hacked, or your hard drive crashes, or a virus infects your wallet, you could lose your investment.

  • Scams. There are many cases of cryptocurrency scams where people have been tricked into investing in fake or fraudulent schemes. For example, the recent case of the so-called “Crypto King” in Ontario revealed Aiden Pleterski allegedly spent $16 million of investor funds on himself and lost another $45 million on the crypto market in just one month, leaving some investors losing their life savings and little recourse.

Mitigate Your Risks: Personal Debt Help in Ottawa

If you’re struggling with debt due to a downturn in the market or bad investment choices, a licensed insolvency trustee at D. & A. MacLeod Company Ltd. can help. We can assist you in making decisions to be able to take control of your debt and guide you to financial freedom. Contact us today to book a confidential consultation or a virtual appointment. Let us help you find a new beginning™.


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