Risk Disclosure

Below is the Risk disclosure of Bitonic which explains the general risks, the risks of storing Bitcoin with Bitonic and the risks of storing Bitcoin in a personal wallet, associated with Transactions involving Bitcoin.

This document outlines some of the key risks related to the use of the Services and Bitcoin in general, but constitutes a non-exhaustive list. The definitions used in this document have the same meaning as those in the User Agreement.

Article 1: General risks

1. There is a risk that Bitcoin may become irreparably damaged due to a bug in the protocol. This could result in a lack of consensus regarding the contents of blocks or the loss of certainty that only the owner can spend their Bitcoin. This may also have implications for Lightning. Furthermore, User is aware of the risks associated with Lightning and understands that using Lightning is highly experimental and is done entirely at their own risk.
2. Bitcoin Transactions are, in principle, irreversible, meaning that once a User sends Bitcoin to a Receiving Address, the Transaction generally cannot be undone, reversed or refunded.
3. There is a risk that a single party, such as a miner or mining pool, could gain control of more than half of the network's computational power (a so-called 51% attack), which could lead to centralisation and censorship, such as ignoring valid Transactions. Furthermore, a lack of geographic distribution of miners may also be problematic and could result in similar consequences. Another centralisation risk is that a party that produces the majority of mining equipment may insert backdoors into the hardware. Furthermore, the centralisation of Bitcoin ownership by custodians, trading platforms, hedge funds or wealthy individuals, as well as rising costs and declining numbers of nodes, may lead to centralisation issues.
4. There is a risk that the security budget for miners becomes so low that more miners cease operations and abandon their equipment. This could make it ‘easier’ to dominate the network and potentially prevent the processing of Transactions. For example, one entity with exclusive access to a significant technological advantange could mine more efficiently, allowing them to gain control of the majority of computational power.
5. There is a risk that Bitcoin may not be easily convertible into Euro due to a lack of demand. At Bitonic, this risk is lower because the User trades directly with Bitonic, and Bitonic offers a price guarantee for a certain period (due to our cooperation with various trading platforms). However, this could mean that the User trades above or below the market price, potentially resulting in lower profits or higher losses. On BL3P, the risk of low liquidity is greater, as the price is determined by the free market and dependent on demand in the Order Book.
6. Market risk is influenced by macroeconomic factors and arises when general market conditions change. This can result in fluctuations in interest rates, commodity prices, equities, currencies, Bitcoin and other asset classes.
7. The price of Bitcoin can be volatile and will likely continue to fluctuate, posing price risk and potential losses. Past performance is not indicative of future results. By diversifying investments across different asset classes (such as Bitcoin, equities and others), this risk can be somewhat mitigated.
8. Legal and regulatory risks arise from the fact that Bitcoin is unregulated in certain jurisdictions outside the European Union. Globally, there is a lack of regulatory harmonisation and cohesion, which may lead to varying regulatory frameworks. Moreover, regulations regarding Bitcoin may change in the future, including potential bans.
9. The tax regime applicable to the Buying, Selling and holding of Bitcoin by natural or legal persons depends on the jurisdiction in which they reside. This can pose a source of risk due to potential variations and uncertainties in tax laws and regulations.
10. The AML/CFT risk is that wallets containing Bitcoin or crypto-assets may be used for money laundering or terrorist financing or may be linked to a person who has committed crimes.
11. The 'Proof of Work' consensus mechanism of Bitcoin has a certain climate impact, which is dependent on energy consumption and the sustainability of energy generation. Compliance with environmental regulations concerning consensus mechanisms could impact Bitcoin, depending on how the value of 'truly' decentralised money or networks is perceived.
12. The risk of fraud involves the loss of Bitcoin due to scams, fraud, or other illegal activities. Users may lose Bitcoin through phishing, broker scams, romance scams, fake giveaways or identity theft.

Article 2: Risks of storing Bitcoin with Bitonic

1. Storing Bitcoin in the Bitonic Portfolio is simple and requires little technical knowledge, but it does carry risks. A significant risk is counterparty risk, where Bitonic may fail to meet its contractual obligations. Although User Funds, both in Euro and Bitcoin, are securely stored in a Foundation and are generally protected against bankruptcy, unforeseen circumstances such as hacks, human errors, technical failures, or defaults by payment service providers or banks may still lead to the loss of Funds.
2. There is a risk that the User's Account with Bitonic could be hacked or that unauthorised access could be obtained, resulting in the irrevocable loss of Funds. It is the User's responsibility to secure the Account properly. Bitonic strongly recommends choosing a unique and complex password and using two-factor authentication (2FA).
3. There is a risk that Bitonic's App or Website(s) may be temporarily unavailable, preventing transactions. Bitonic strives to remain online at all times and minimise any interruptions.

Article 3: Risks of storing Bitcoin in a personal wallet

1. Storing Bitcoin in a personal wallet offers a great deal of freedom but also comes with risks. The User is solely responsible for securing their wallet and seed phrase. This requires some basic knowledge and skills. While extensive measures can be taken to secure wallet(s), it is important to recognise that security vulnerabilities and software hacks cannot be fully ruled out. Moreover, there is no one who can recover access to Bitcoin if the User loses their wallet or seed phrase.
2. In the event of the loss or theft of a wallet and seed phrase, the User risks losing Bitcoin. While Bitonic is happy to assist the User, in such a case, Bitonic will likely be unable to help.
3. If the manufacturer of a hardware or software wallet discontinues production or stops updating the firmware or software, this poses risks. While the User can often switch to open-source software or import the wallet using the seed phrase into another wallet, it is important for the User to be aware of this risk.