Key takeaways
- You can lose a large part, or all, of what you put into crypto. The price of bitcoin fell by 61% in krónur during 2022, and many other coins fell even further.
- The other main risks are losing access, scams, a provider failing, changing rules, putting too much into one coin, and leverage.
- No deposit guarantee covers crypto, and blockchain transactions can't be reversed.
- Common ways to keep the risk in check are to invest only money you can afford to lose, decide on an amount in advance and never borrow to buy.
Contents
Before you buy crypto, you need to know that you can lose a large part, or all, of what you put in. The main risks are sharp price swings, losing access, scams, a provider failing, changing rules, putting too much into one coin, and leverage.
Many people own crypto, and understanding what can go wrong helps you do it sensibly. This article goes through each risk with examples, then the methods people use to keep it in check.
Prices can fall fast and far
Crypto prices can rise and fall a lot in a short time. This is called VolatilityVolatilityHow much and how quickly the price of an asset moves up and down.. The European supervisory authorities EBA, EIOPA and ESMA warn that you can lose a lot, or even all, of the money you put into crypto.
Every year, Skatturinn (Iceland Revenue and Customs) publishes the year-end rates of some of the main cryptocurrencies in krónur. According to those figures, one bitcoin was valued at ISK 5,997,611 at the end of 2021 and ISK 2,350,130 at the end of 2022. That is a fall of 61% in one year. If you had bought ISK 100,000 worth at the end of 2021, you would have had about ISK 39,000 a year later.
The swings go both ways. From the end of 2022 to the end of 2024, the value rose more than fivefold to ISK 12,889,465, and by the end of 2025 it was down to ISK 10,915,873, according to the same tables. Nobody can tell where the price goes next. Read more about why crypto prices are so volatile.
The króna exchange rate matters too. Most crypto prices are set in US dollars, so the value in krónur also changes when the dollar rate moves.
You can lose access
If you keep crypto in your own wallet, whoever has the private keyPrivate keyA secret number that proves you own the crypto in your wallet. Whoever holds the private key controls the crypto. controls it. If you lose the key and your seed phraseSeed phraseA list of 12 or 24 words that backs up every key in your wallet, so whoever has the words can restore the wallet and take the crypto., the crypto is gone for good. No bank or customer service can recover it for you.
Blockchain transactions can't be reversed either. If you send crypto to the wrong wallet addressWallet addressA string of letters and numbers you give out to receive crypto, much like a bank account number., you usually won't get it back. It matters whether you've lost the login to a service or the key to your own wallet. Read about the difference.
Scams are common
Scammers use crypto a lot. The supervisory authorities point out that they use PhishingPhishingA scam where criminals pretend to be a trusted company or authority to get you to hand over passwords, card details or your seed phrase., social engineering and malicious links, promise unrealistic returns and claim to be licensed when they are not.
A common pattern is that someone contacts you out of the blue, promises quick profits and pressures you to send crypto right away. Once the crypto has gone, it is almost always lost. No legitimate service will ever ask for your seed phrase. Learn about the most common crypto scams.
A provider can fail
When you keep crypto with a CustodianCustodianA company that holds crypto and the keys to it on behalf of customers, such as a licensed crypto exchange., you trust it to handle your crypto properly. That trust was broken for customers of FTX, an international crypto exchange that collapsed in November 2022.
According to the US Department of Justice, the founder of FTX told customers that their deposits were kept safe and separate from the company's assets. That was false. He used billions of dollars of customer money for his own purposes and was sentenced to 25 years in prison in March 2024. The prosecutor called it one of the largest financial frauds in history.
Under MiCA, crypto-asset service providers in the EEA now need a licence and must keep client assets separate from their own. That reduces the risk but doesn't remove it, and no deposit guarantee covers crypto.
Rules can change
Crypto rules are fairly new and can change. In Iceland, Act No. 101/2025 on markets in crypto-assets took effect on 1 January 2026. From 1 July 2026, providers without a licence had to stop operating, and their customers were urged to move their crypto elsewhere.
The Central Bank of Iceland also has the power to ban or restrict the marketing and sale of certain crypto-assets. Tax rules can change too, and other countries can introduce rules that affect prices. Read more about MiCA.
Too much in one coin
If everything you hold in crypto is in one coin, everything depends on what happens to that coin. Smaller coins often swing more than the larger ones. According to Skatturinn's tables, ether fell by 64% in krónur in 2022 and solana by 94%, while bitcoin fell by 61%.
This applies especially to memecoinsMemecoinA cryptocurrency born from an internet joke or meme, usually with little or no practical use, whose price rests almost entirely on hype., coins often created around jokes or online trends. Keep in mind, too, that cryptocurrencies tend to fall together. Every coin Skatturinn published rates for in both years fell by 47-94% in 2022, apart from stablecoins.
Leverage multiplies losses
With LeverageLeverageTrading with borrowed money, which multiplies both gains and losses and can wipe out your whole stake in a short time., you buy for more than you have, using borrowed money or derivativesDerivativesContracts whose value comes from another asset, such as shares, a currency or a cryptocurrency.. Both gains and losses are multiplied. With five times leverage, a 20% price fall is enough to wipe out everything you put in. On many platforms the position is then sold automatically, so you don't get the chance to wait for the price to recover.
The same applies if you take out a loan to buy crypto. The loan has to be repaid, whatever happens to the price.
How people keep the risk in check
This is not investment advice, but methods that many people use. What suits you depends on your own situation.
- Only money you can afford to lose. Ask yourself whether you could live with the amount disappearing. Money you'll need soon, for rent or an emergency fund for example, is not money you can afford to lose.
- Decide on an amount in advance. When the amount is set in advance, it's less likely that FOMOFOMOThe fear of missing out, which pushes people to buy in a hurry when prices rise fast, often close to the top. or fear will take over when prices move.
- Spread purchases over time. Many people buy the same amount at regular intervals instead of all at once. This is called Dollar-cost averaging (DCA)Dollar-cost averaging (DCA)Buying the same amount at regular intervals, for example monthly, instead of investing everything at once..
- DiversificationDiversificationSpreading your money across different assets so that a fall in one of them has less effect on the whole.. Many people see crypto as a small part of a bigger picture, alongside other kinds of savings. As 2022 showed, spreading money across different coins only partly reduces the risk.
- Don't borrow to buy. With borrowed money, you can lose more than you put in yourself.
- Keep records of your trades. A record of purchases and sales gives you an overview, and you'll need it for tax. Read about crypto and tax in Iceland.
- Choose a licensed provider and protect your account. Use two-factor authenticationTwo-factor authentication (2FA)A login that needs two different proofs of who you are, such as a password and a code from an app, so a stolen password isn't enough. and never share your seed phrase.
Frequently asked questions
Can a cryptocurrency become worthless?
Yes. The European supervisory authorities warn that you can lose everything you put into crypto. Under MiCA, a crypto-asset's white paper must state that it may lose its value in part or in full. How likely that is varies a lot between coins, though. Many small coins have disappeared, while the largest have recovered from deep falls before. That is no guarantee for the future.
Is crypto safer with a licensed provider?
In some ways. A licensed provider must keep client assets separate and is supervised. The price risk is the same, though, and no deposit guarantee covers crypto.
How much of my savings should I put into crypto?
We don't give investment advice and don't suggest any percentages. It depends on your finances, your goals and how well you cope with price swings. An independent financial adviser can help you assess it.
Closing thoughts
Crypto prices can swing sharply, and you can lose a large part, or all, of what you put in. Access can be lost, scams are common, and even large companies can fail, as FTX showed.
The risk doesn't go away, but you can keep it in check. Only put in money you can afford to lose, decide on the amount in advance, don't borrow, and choose a licensed provider. The responsibility for buying is always yours.
