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CFA Level I · CFA Level I Exam · Introduction to Digital Assets

Compared with a traditional equity investment, a long position in a cryptocurrency held directly by an investor is most likely to expose the investor to which additional risk?

Loss or theft of private keys leading to permanent loss of access is the additional risk. Direct cryptocurrency holders control assets through private keys, and without them there is usually no custodian or recovery process, unlike equity held through a regulated broker.

  1. ALoss of private keys leading to permanent loss of accessCorrect
  2. BExposure to changes in corporate earnings
  3. CDilution from the issuance of new shares

Explanation

Direct holders control assets through private keys; if lost or stolen, access is typically unrecoverable. Earnings exposure and share dilution are features of equities, not additional risks of cryptocurrency.

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