Risk Disclosure

📅 Effective: 2025-01-15

▮ This page is mandatory reading before any "Visit Site" click. Crypto derivatives can amplify losses to 100% of capital — and beyond if your exchange enforces "auto-deleveraging" or socialised loss.

▮ 1. Liquidation Risk

Perpetual contracts use leverage. When mark price moves against your position, your maintenance margin can be wiped out in seconds. Liquidation engines may close positions at unfavourable prices, leaving zero remaining equity.

Common liquidation triggers:

BTC ±5% in 1 minute (flash crash)
Funding rate spike (cross-margin contagion)
API outage during volatility (you can't react)
Exchange wedge: insurance fund depleted → ADL triggers

▮ 2. Funding Rate Risk

Perpetual contracts use funding payments every 8 hours. Holding for 30 days at 0.05% per 8h = 5.4% accumulated cost. In trending markets, funding can hit 0.1-0.3% per 8h on overheated tokens — meaning 30-day cost of 11-32%.

▮ 3. Counterparty / Exchange Risk

Centralised exchanges hold your funds in their hot/cold wallets. Historical incidents:

FTX (Nov 2022): $8B+ user funds lost
BitMart (Dec 2021): $200M hot wallet drained
KuCoin (Sep 2020): $280M hack (recovered)
Various: deposit halts, withdrawal freezes during runs

"Not your keys, not your coins." Use cold storage for long-term holds.

▮ 4. Jurisdictional Risk

Crypto regulation varies dramatically by country:

US: SEC enforcement, no clear federal framework
UK: FCA strict; some products banned for retail
EU: MiCA effective June 2024 — full transition by 2026
Mainland China: trading and mining banned
Russia / Belarus / Iran: OFAC sanctions limit access

Verify your local laws before trading. CryptoCompass does not serve US, UK mainland, Mainland China, or OFAC-sanctioned residents.

▮ 5. Tax Risk

Crypto profits are taxable in most jurisdictions. Failure to report can result in penalties exceeding 100% of the gain. Common frameworks:

US: Form 8949, every trade is taxable, 1099-DA from 2025
UK: Capital Gains Tax 10-24%, £3,000 annual allowance (2025/26)
EU: varies; OECD CARF effective 2027

▮ 6. Phishing / Social Engineering Risk

Most exchange "hacks" of retail users are phishing or fake support. Always:

Verify the official URL before entering credentials
Use 2FA hardware (YubiKey) instead of SMS
Set a Binance/OKX Anti-Phishing Code
Whitelist withdrawal addresses
Never share seed phrases — exchange staff never ask for them

▮ 7. Disclaimers

This site is educational and does not constitute investment advice, tax advice, legal advice or trading signals. Information is provided "as is" — verify all figures with the exchange's official channels before trading. Past returns do not predict future results. Loss of principal is possible and probable.