In principle, investing in cryptocurrencies is similar to other investments. You enter the investment opportunity at a specific price and expect the value of your investment to appreciate after a specific time horizon. This means applying the same principles as you would in any other volatile investment. The only major difference is that cryptocurrencies are more volatile than most investment opportunities. Some points to consider prior to investing:
Plan ahead. High price volatility is normal, meaning prices can go up and down quickly and sometimes irrationally. You should have a plan of action for all scenarios.
Understand limitations. Cryptocurrencies are in their early stages, which means that cause and effect of news and other events might not have a straightforward relationship to cryptocurrency prices. You should temper assumptions and factor in the effect limited information will have on formulating your investment strategy.
Be prepared. Unlike traditional stock markets, there are no trading hours for cryptocurrencies. Cryptocurrency price fluctuations happen year-round at any time of day. Make sure to keep this in mind when planning to manage your investment.
Never invest an amount above your risk threshold.
NOTE: Buying, selling, or holding cryptocurrency carries a substantial risk of loss. Accordingly, you should carefully evaluate whether buying, selling, or holding cryptocurrency is appropriate for your financial situation.
In addition to following the above guidelines, users should also consider specific risks relating to specific digital assets.
Stablecoins are cryptocurrencies that claim to be backed by assets, e.g. fiat, other crypto assets, or commodities such as gold, etc. There may be instances that some stablecoins are not fully assets-backed or not 1 to 1 pegged to its backed assets, and consequently, the value attributed to the stablecoins may not be its true value.
Cryptocurrencies are being transacted and monitored via new technologies (including distributed ledger technologies and smart contracts). This involves various risks including, but not limited to, irreversible transactions, irrecoverable funds, transaction settlement failures, and cybersecurity risks.
These risks, among other risks, may lead to gaining profits, and they may also result in significant losses.
Rain performs extensive due diligence before listing any digital asset; however, investing is by nature a risky activity, and investors should do their best to manage risks and educate themselves on potential risk factors.
Due diligence factors considered during Rain's listed process include, but are not limited to:
Technological experience, track record and reputation of the issuer and its development team
Ability to implement AML/CFT measures
Utility or use case
Geographic and token distribution
Security and consensus protocol
Rain also regularly reviews already-listed assets for any material changes in the factors mentioned above.
Important note: The CBB has not reviewed nor approved the crypto-assets listed herein.
TrueFi (TRU) - TRU is the token of TrueFi protocol for uncollateralized lending, powered by the on-chain credit scores and governed by holders of the TRU token. TRU is used for staking to approve or reject new loans as a governance vote in the TrueFi protocol. TRU is an ERC-20 token and thus relies on the scaling capabilities of Ethereum, which has a Proof-Of-Work Blockchain consensus. Even though TrueFi has undergone continuous audits by third party auditing firms, including Slowmist, ETH works, and Certik, to mitigate its Smart contract risk there will still be some additional risks. Such as risks associated with the broader crypto market, such as Regulatory, Volatility, and Operational risk. A particular risk is Credit risk; as over-collateralized loans offset the Credit risk posed to the lenders, uncollateralized loans in True-Fi essentially reinstate Credit risk. Assessment of creditworthiness by holders of TRU tokens to borrowers may cause the lender's loss of funds in the case of default.
Gala (GALA) - Gala is a gaming and NFT platform by GALA games founded by Eric Schiermeyer. GALA aims to build an ecosystem of blockchain games which operates on both Ethereum and BSC. GALA is an ERC-20 token used for payments on the Ethereum blockchain and also exists on the Binance Smart Chain as a BEP-20 token. The Gala token is used to power the in-game economy across all the different games available in the ecosystem and incentivize node operators to support and facilitate the network. GALA uses a hybrid consensus mechanism, which incorporates Proof-of-Work (PoW), Proof-of-Stake (PoS), and Proof-of-Storage. In addition to the risk associated with the broader crypto market, such as Regulatory, Operational, and Smart contract risk. Gala experiences in imparticular Market & Volatility risk from the Play-To-Earn & NFT sector. Due to the infancy of these two areas, there is an increased likelihood of more failing projects and more volatility regarding the price. Additionally, Smart contract risks are something else to consider; however, Gala Games passed an ERC-20 Smart contract audit by AnChain.AI, a security audit that stated the arrangement concluded it was safe to be listed on digital asset exchanges.
Civic (CVC) - Civic is a protocol identity management solution that gives individuals and businesses the tools to control and protect personal identifiable information. The Crypto Asset issuer is Civic Technologies, Inc. Civic was co-founded in 2015 by Vinny Lingham and Jonathan Smith. Civic (CVC) is an Ethereum ERC-20 token used utilizing the Ethereums Proof-Of-Work (POW) consensus mechanism. CVC operates as the primary utility token for the network; you must hold CVC to utilize the network's features and services. There are no significant specific risks other than those associated with the broader market, such as Regulatory, Volatility, Operational, and Smart contract risks.
Nexo (NEXO) - Nexo is an online platform for crypto-backed loans. To users like investors, miners, hedge funds, exchanges, and token projects. Users can transfer assets to Nexo and immediately withdraw funds via the Nexo card or a bank account. The NEXO token is an ERC-20 interest-bearing security token that the company markets as "SEC-Compliant". NEXO is an ERC-20 token, thus relying on the scaling capabilities of its underlying blockchain - Ethereum, which uses a Proof-Of-Work Blockchain consensus. As a security token NEXO token holders receive a dividend of 30 per cent of company profits, divided proportionally by token balance. Other than the risks the crypto market faces, such as Market, Volatility and Regulatory risk, Nexo has risks associated with its protocol. This risk is to do with the protocol's borrowing and lending model, which can be considered riskier in crypto than in the traditional sector. Nexo functionality makes it similar to a bank that covers the depositor's assets if the bank defaults. However, Nexo is not a classical bank, and default risk is not the same as banks. When a bank lends money to an individual, there is no guarantee that the individual can pay back the principal, meaning there is exposure to Credit risk.
dYdX (DYDX) - dYdX is a decentralized exchange platform for cryptocurrency for spot and margin trading. dYdX was founded by Antonio Juliano, a former software engineer at Coinbase. dYdX is a governance token that allows the dYdX community to govern the protocol. dYdX allows traders, liquidity providers, and partners of dYdX to work collectively towards an enhanced Protocol through governance. dYdX token is used in the ecosystem for the ability to make policy changes, get trading fee reductions, and receive staking rewards. dYdX is an in-platform token for the dYdX Layer 2 protocol. Additional to the risks the crypto market faces, such as Market, Volatility and Regulatory risk. dYdXs potential risk is using its own unique Layer 2 scaling solution that might not be as tried and tested to the incumbent blockchains. Furthermore, To mitigate its Smart contract risk dYdX's perpetual smart contracts were audited independently by PeckShield. The project also publishes its vulnerability disclosure policy to ensure the protocol's security long term.
ApeCoin (APE) - ApeCoin is a community developed project governed by a decentralized autonomous organization, the ApeCoin DAO. The main contributor and builder of this product is Yuga labs, a Web3 company best known for the creation of the Bored Ape Yacht Club (BAYC). The APE token will be adopted as the governance and utility token used within the APE ecosystem such as exclusive games, events, and services. It can also be used for payments and transactions within the Web3 applications. The APE token is an ERC-20 token built on top of the Ethereum blockchain, therefore it relies on Ethereum's current Proof-of-Work consensus and will eventually scale to Proof-of-Stake. There are some concerns over the sudden popularity of selling and trading non-fungible tokens. Some have noted that the current interest surrounding NFTs might create an economic bubble that will eventually collapse due to market hype, speculation and herding tendency, and overvaluation of digital NFT assets.
KeeperDAO (ROOK) - KeeperDAO is a protocol that economically incentivizes pooled participation in 'keeper' strategies which manage liquidations and rebalances on applications spanning margin trading, lending and exchange. Keeper DAOs native token is ROOK which is an ERC-20 token that runs on the Ethereum blockchain. ROOK is used for governance; it allows token-holders to propose and vote on all protocol upgrades. Additionally, profit share is distributed between LPs and keepers, alongside new system proposals. Rook token relies on the scaling capabilities of Ethereum, Proof-Of-Work Blockchain consensus. Additional to the risk associated with the broader cryptocurrency market in general. Such as Volatility, Operational, and Smart contract risk. KeeperDAOs most significant risk is it being a DAO & what future regulatory pressure it could face. As DAOs are not yet adequately regulated, this does pose uncertainty longer term. There are also risks around unilateral decision making through the dominance of governance tokens in DAOs. To mitigate Smart contract risk, KeeperDAO has undergone 3 separate audits with third-party auditors and independent consultants in terms Smart contract risk. Prior to any upgrade to the protocol in the future, they will undergo security audits ahead of any new deployment.
Shiba Inu (SHIB) - Shiba Inu was first created in August 2020 as a decentralized meme token created by an anonymous individual or group called Ryoshi. Since its creation, the project has developed a diversified, decentralized ecosystem that consists of DEX (decentralized exchange), DAO (decentralized autonomous organization, games, NFTs and many other products where the SHIB token is adopted as the foundational currency. While growing in popularity and market capitalization, the SHIB token is becoming accepted as a method of payment for services at large retail stores. The SHIB token is an ERC-20 token built on top of the Ethereum blockchain; therefore, it relies on Ethereum's current Proof-of-Work consensus and will eventually scale with them to Proof-of-Stake. It is important to note that Shiba Inu's development team remains anonymous. Investing in meme-inspired tokens is subject to market risk and high volatility.
Wrapped Bitcoin (WBTC) - Wrapped Bitcoin is an ERC-20 version of Bitcoin that 1 WBTC equals 1 BTC, governed by the WBTC DAO. Members of the DAO include merchants who are institutions or parties that have the key to issue or create new WBTC tokens, and custodians who are responsible for the custody of the underlying BTC assets. BitGo is the most prominent custodian for WBTC and places the underlying BTC in their cold storage. Other members are Ren, Dharma, Kyber, Compound, MakerDAO, and Set Protocol. The WBTC token is subject to the market risk and price volatility of its back asset Bitcoin. It also has custody risk arising from the custodian partners' insolvency, negligence, misuse of assets, fraud, poor administration or inadequate record-keeping.
Dai (DAI) - DAI is a decentralized collateral-backed cryptocurrency decentralized stablecoin issued by the MakerDAO (Decentralized Autonomous Organization), an application on the Ethereum blockchain. DAI is able to maintain its peg through a balance of economic incentives and game theory. The system creates an arbitrage opportunity every time there is a deviation from the one-to-one peg. DAI is an ERC-20 token that was built specifically to run on the Ethereum blockchain. DAI token relies on the scaling capabilities of Ethereum, Proof-Of-Work Blockchain consensus. In terms of risk, the successful operation of the Maker Protocol depends on Maker Governance taking the necessary steps to mitigate risks. Some of those risks are Black Swan events, Smart contract risk, Pricing errors, Market irrationality risk, Technology risk, and the risk associated with a lack of users.
PAX Gold (PAXG) - PAX Gold is backed by Paxos, a New York State-chartered trust company regulated by the New York State Department of Financial Services (NYDFS). The PAXG token is a digital asset that represents one fine troy ounce of a London Good Delivery gold bar. Unlike other forms of investments into gold like buying Certificates, ETFs or physical gold, the PAXG token is available 24/7 and can be purchased via CHF, USD, EUR or GBP. It provides a cost-efficient solution to gold ownership and enables instant settlement. The PAXG token is an ERC-20 token built on top of the Ethereum blockchain, therefore it relies on Ethereum's current Proof-of-Work consensus and will eventually scale with them to Proof-of-Stake. Withum audits the supply of PAXG on a monthly basis and the attestation report is available in the Paxos website. The physical gold backs it, thus considered a low-risk investment class.
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