Crypto: what the risk actually is

Crypto assets trade continuously and can move materially while Canadian markets are closed. That alone changes how a position behaves inside a portfolio that otherwise prices once a day.

Three risks that are usually conflated

• Price volatility: large drawdowns are normal, not exceptional, and position sizing is the only real defence.
• Custody: who holds the asset and under what legal protection. Self-custody, exchange custody and fund custody fail in different ways.
• Disclosure: what you can actually verify about supply, holders and governance for the specific asset.

The Canadian regulatory frame

Crypto trading platforms serving Canadians must register with provincial securities regulators, and listed crypto funds are subject to the same continuous-disclosure rules as any other issuer. That does not make the underlying asset less volatile — it changes who is accountable when something goes wrong.

Listed issuers with crypto on the balance sheet

For listed issuers holding crypto, read the custody and impairment notes in the financial statements. Accounting treatment can recognise write-downs without recognising later recoveries, so reported book value and market value can diverge sharply.

A practical test

If you cannot explain in one sentence what would make the asset worth more in five years, you are trading momentum. That is a legitimate choice, but it should be a deliberate one.