NotDAX

Risk Disclosure

Understanding the risks of digital asset trading. We believe in transparency and want you to make informed decisions about your investments.

Last Updated: January 2025

Effective Date: January 2025

⚠️ HIGH RISK WARNING

Digital asset trading involves substantial risk and may result in total loss of your invested capital. You should not invest money that you cannot afford to lose. Digital assets are highly volatile, and their value can fluctuate dramatically. Past performance does not guarantee future results.

1. Market Risk

Digital asset markets are extremely volatile and can experience rapid and significant price movements.

Price Volatility

  • Digital assets can lose 50% or more of their value in a single day
  • Prices may be influenced by speculation rather than fundamentals
  • Market sentiment can change rapidly and unpredictably
  • Low liquidity can amplify price movements
  • Flash crashes and sudden spikes are common

Market Factors

  • 24/7 trading means prices never stop moving
  • Global events can have immediate market impact
  • Whale transactions can manipulate smaller markets
  • Social media and news can drive extreme volatility
  • Correlation with traditional markets may increase during stress
Example: In May 2022, Luna (TERRA) lost over 99% of its value in less than 48 hours, wiping out approximately $60 billion in market capitalization and causing widespread losses.

2. Technology Risk

Digital assets rely on complex blockchain technology that carries inherent technical risks.

Blockchain Risks

  • Smart contract bugs can lead to permanent loss of funds
  • Network forks may create competing chains
  • 51% attacks could compromise network security
  • Scalability issues may cause network congestion
  • Quantum computing may threaten current cryptography

Platform Risks

  • Exchange hacks and security breaches
  • Technical glitches affecting trading
  • System downtime during critical market periods
  • API failures and data feed interruptions
  • Wallet software vulnerabilities
Historical Note: The 2016 DAO hack resulted in the loss of 3.6 million ETH (worth $50 million at the time) and led to the controversial Ethereum hard fork.

3. Regulatory Risk

The regulatory landscape for digital assets is rapidly evolving and uncertain.

Government Actions

  • Governments may ban or restrict digital asset trading
  • New regulations could impact asset values or trading ability
  • Tax treatment may change, affecting profitability
  • Compliance costs may increase operational expenses
  • Legal status of specific assets may be challenged

Compliance Challenges

  • Unclear or conflicting regulatory guidance
  • Different rules across jurisdictions
  • Retroactive application of new regulations
  • Enhanced KYC/AML requirements
  • Potential forced asset seizures or freezes
Current Environment: The EU's MiCA regulation and evolving national laws create a complex regulatory environment that continues to develop.

4. Liquidity Risk

You may not be able to buy or sell digital assets when you want to, at the price you expect.

Market Liquidity

  • Low trading volume can create large bid-ask spreads
  • Large orders may significantly impact market prices
  • Some assets may have very limited trading activity
  • Market makers may withdraw during volatile periods
  • Geographic restrictions may limit available markets

Platform Liquidity

  • Exchange outages may prevent trading
  • Withdrawal restrictions during high volume
  • Network congestion may delay transactions
  • Suspension of trading pairs
  • Emergency circuit breakers

5. Operational Risk

Risks related to the operation of digital asset platforms and infrastructure.

Security Risks

  • Cyberattacks and hacking attempts
  • Insider threats and employee fraud
  • Loss of private keys or access credentials
  • Phishing and social engineering attacks
  • Third-party service provider failures

Business Risks

  • Exchange insolvency or bankruptcy
  • Mismanagement of customer funds
  • Operational errors and human mistakes
  • Inadequate insurance coverage
  • Vendor and counterparty risks
Recent Example: The FTX collapse in November 2022 resulted in billions of dollars in customer losses due to alleged mismanagement and potential fraud.

6. Fraud and Criminal Activity Risk

The digital asset space has attracted various forms of fraudulent and criminal activity.

Common Scams

  • Ponzi schemes and pyramid structures
  • Fake exchanges and wallet services
  • Pump and dump schemes
  • Romance and investment scams
  • Celebrity and social media impersonation
  • Fake ICOs and token sales

Criminal Uses

  • Money laundering and illicit transfers
  • Ransomware and extortion payments
  • Dark web marketplace transactions
  • Tax evasion and avoidance
  • Sanctions circumvention
  • Terrorist financing
Warning: Be extremely cautious of unsolicited investment opportunities, guaranteed returns, or requests to send digital assets to unknown parties.

7. Psychological Risk

Digital asset trading can have significant psychological and emotional impacts.

Emotional Trading

  • Fear of missing out (FOMO) can lead to poor decisions
  • Panic selling during market downturns
  • Overconfidence during bull markets
  • Revenge trading after losses
  • Addiction to trading and gambling-like behavior

Mental Health Impact

  • Stress and anxiety from constant price monitoring
  • Depression from significant financial losses
  • Sleep disruption due to 24/7 markets
  • Relationship strain from investment losses
  • Social isolation and obsessive behavior
Recommendation: If you find trading is negatively affecting your mental health or relationships, consider seeking professional help and taking breaks from active trading.

Risk Management Guidelines

While we cannot eliminate risks, we recommend these practices to help manage them:

Investment Principles

  • Only invest what you can afford to lose completely
  • Diversify across different assets and asset classes
  • Set clear stop-loss and take-profit levels
  • Maintain a long-term perspective

Security Practices

  • Use strong, unique passwords and 2FA
  • Keep software and devices updated
  • Verify all website URLs and communications
  • Consider hardware wallets for large holdings

Educational Resources

We encourage all users to educate themselves about digital assets and trading risks:

Risk Assessment

Complete our risk tolerance questionnaire before trading

Trading Education

Learn about technical analysis, market fundamentals, and strategy

Ongoing Support

Access to our customer support team and educational materials

Legal Disclaimer

This risk disclosure does not constitute investment advice. The information provided is for educational purposes only and should not be considered as recommendations to buy, sell, or hold any digital assets.

You acknowledge that you have read and understood this risk disclosure, and that you are making independent investment decisions based on your own research and risk tolerance.

NotDAX does not guarantee the accuracy or completeness of this information, and we disclaim all liability for any losses resulting from your use of our platform or investment decisions.

By using NotDAX, you acknowledge that you have read, understood, and accepted all the risks outlined in this disclosure.

Questions About Risk?

If you have questions about the risks of digital asset trading or need clarification on any aspect of this disclosure, please contact our team.

Contact Support Educational Resources