ASIC's Moneysmart describes crypto-assets as high risk and speculative. That is not a judgement about any single coin; it reflects the way crypto markets work, the immaturity of much of the industry, and the limited protections available when things go wrong. Knowing the specific risks helps you make informed decisions and spot when something is off.
1. Price volatility
Crypto prices can rise and fall by large amounts in days or hours. Most crypto-assets produce no income, so there is no earnings anchor for their value. Prices respond to sentiment, social media, regulatory news, interest rates and large holders buying or selling. Many tokens have fallen close to zero and never recovered.
2. Platform failure
When a platform holds your crypto, you are exposed to the company. Overseas platform failures, including the 2022 collapse of FTX, left customers unable to access their funds. Platforms can also freeze withdrawals during market stress. Read how to check a crypto platform.
3. Hacks and theft
Exchanges, wallets, bridges and DeFi protocols are attractive targets. Hacks have stolen very large sums over the years. Individuals are targeted through phishing, malware, SIM swaps and fake apps.
4. Lost keys and user error
In self-custody, losing your seed phrase can mean losing your crypto permanently. Sending to the wrong address or network is usually irreversible. Read crypto wallets, keys and seed phrases.
5. Limited protections
| Protection | Bank deposits | Crypto |
|---|---|---|
| Financial Claims Scheme | Eligible deposits covered | Not covered |
| AFCA complaints | Banks are members | Only if the business is a member |
| Reversal of fraud | Sometimes possible | Rarely possible |
Australia's new digital asset platform licensing framework, scheduled to commence in April 2027, is designed to bring licensed platforms under financial services obligations. Until then, protections depend heavily on the individual business. Read crypto regulation.
6. Leverage and complex products
Some platforms offer leveraged trading, derivatives or "earn" products. Leverage magnifies losses as well as gains. ASIC has placed restrictions on crypto CFDs offered to retail clients. Complex yield products can hide significant risks.
7. Liquidity and market manipulation
Smaller tokens may have few buyers, making it hard to sell without crashing the price. Thin markets are vulnerable to "pump and dump" schemes, where promoters inflate prices and sell to latecomers.
8. Project and smart contract risk
Tokens can be abandoned by developers or deliberately designed to fail ("rug pulls"). Smart contract bugs can be exploited. A slick website and active social media prove nothing.
9. Scams
Scams are one of the biggest risks for Australians in crypto, from fake trading platforms to romance scams and impersonation. Read crypto scams explained and try the scam red-flag checker.
10. Tax surprises
Swapping one crypto for another can be a taxable event even if you never convert to dollars, and poor records make tax time difficult. Read crypto tax basics.
Questions worth asking
Before you take on crypto risk
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Where to get help
- Licensed financial advice: check the adviser on ASIC's Financial Advisers Register.
- Free financial counselling: the National Debt Helpline on 1800 007 007.
- Scams: report to Scamwatch and contact your bank immediately.
- Identity compromise: IDCARE.
Key terms
- Volatility: how much and how fast a price moves.
- Counterparty risk: the risk that the business on the other side fails or does not deliver.
- Liquidity: how easily you can sell without moving the price.
- Leverage: borrowing to trade, magnifying gains and losses.
- Liquidation: when a leveraged position is closed automatically because losses have used up the collateral.
- Rug pull: when token developers abandon a project and take investors' money.
- Pump and dump: hyping a token to inflate its price before selling to latecomers.
- Slippage: the difference between the expected and actual price of a trade, often large in thin markets.
Emotional risks
Crypto markets run around the clock and social media can amplify fear of missing out. Checking prices constantly, chasing losses or borrowing to buy more are warning signs worth taking seriously. If money worries are affecting you, free financial counselling is available through the National Debt Helpline.
The bottom line
Crypto's risks are real and often stacked: volatile prices, fragile platforms, irreversible transfers and limited protections. Understanding them is not about fear; it is about making sure any decision is an informed one.
Frequently asked questions
Can I lose all my money in crypto?
Yes. Crypto prices can fall to zero, platforms can fail and keys can be lost. Moneysmart advises only investing money you can afford to lose.
Is crypto covered by the Financial Claims Scheme?
No. The government guarantee on eligible bank deposits does not cover crypto-assets, including stablecoins.
Can I complain to AFCA about a crypto platform?
Only if the business is a member of the Australian Financial Complaints Authority. Many crypto businesses currently are not. This is expected to change for platforms that become licensed under the new framework.
What is leveraged crypto trading?
Leverage means trading with borrowed money, which magnifies both gains and losses. Losses can exceed your deposit in some products. ASIC has restricted crypto CFDs offered to retail clients.
Why are crypto prices so volatile?
Most crypto-assets have no earnings or cash flows, so their prices are driven by sentiment, speculation, news and liquidity, which can shift quickly.
Is staking risk-free?
No. Staking can involve lock-up periods, price falls, penalties on the network and platform risk if a third party stakes for you.
Sources and further reading
Facts on this page were checked against these primary and official sources. Conditions change — confirm before you travel or buy.
- Cryptocurrencies — ASIC Moneysmart
- Investor alert list — ASIC Moneysmart
- Cryptocurrencies explainer — Reserve Bank of Australia
- FTX — Wikipedia
