Investment advice offered through Stratos Wealth Partners, Ltd., a Registered Investment Advisor DBA BWM Financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.
Cryptocurrency is decentralized digitized money that allows individuals or entities to transfer funds online without the need for a bank or credit card company. Cryptocurrency typically relies on blockchain technology, a network of computers running open-source code, to manage and track these transactions. Unlike the U.S. Dollar, there is no central authority that manages and maintains the value of this currency. Instead, the value is determined by supply and demand in addition to market factors. Therefore, since cryptocurrency-related products purchase and custody cryptocurrency, they are highly speculative and extremely volatile investments. And because these products list shares in the secondary market, investors could lose their entire investment.
Cryptocurrency-related products may involve a high degree of risk. risk considerations include, but are not limited to, the following:
Emerging Asset and Complexity. Cryptocurrencies and crypto-related products are part of a new and evolving industry, and the value of shares depend on their development and adoption of its network. True price discovery and best execution remain a challenge, as a result. Certain technical issues might be uncovered as the network continues to develop and the resolution of these issues requires the attention of cryptocurrencies global development community. Cryptocurrencies were not designed to be investments. They were designed to be mediums of exchange and seen as an alternative to traditional sovereign currencies.
Current Lack of Regulations. Due to the unregulated nature and lack of transparency surrounding the operations of crypto exchanges, they may experience fraud, market manipulation, security failures or operational problems, which may adversely affect the value of cryptocurrencies and, consequently, the value of the shares of cryptocurrency-related products.
SEC Actions. The Securities and Exchange Commission (SEC) has stated certain digital currencies could be considered “registered securities” atsome point. Because of this, the SEC might introduce additional regulation and make it harder to trade, clear and custody compared to other digital currencies not designated as securities.
If designated as a security, these securities could be subject to register under the Investment Company Act of 1940, at which point, products structured as grantor trusts, would need to terminate the trust per its terms. This would involve liquidating the trust at a time that could be disadvantageous to you as a shareholder.
Competing Cryptocurrencies. Certain cryptocurrencies could experience a “hard fork,” meaning a change in blockchain coding that can create a permanent, new cryptocurrency which could then compete with the existing cryptocurrency. In the event of a hard fork, the sponsor will use its discretion to determine which digital asset network is the most appropriate for the product. Doing so may adversely affect the value of shares.