RISK DISCLAMER
RISK FACTORS & DISCLAIMERS
The following risk factors do not purport to be a complete explanation of all risks involved in investing in crypto assets. Potential investors should read this entire document and consult with their legal and other professional advisors before determining to invest in any of the products described on this website.
Alternative Investment
An investment in any of MoonQuant’s offerings is not intended as a complete investment program. A subscription should be considered only by persons financially able to maintain their investment and who can bear the risk of loss associated with an investment in the crypto asset class. Investors should review closely the investment objectives and investment strategies to be utilized by MoonQuant Capital as outlined herein to familiarize themselves with the risks associated with an investment in any of our products. There is no assurance that any of MoonQuant’s products will be able to achieve their investment objectives.
General Investment Risk
The Net Asset Value of the different products or funds will vary directly with the market value of the underlying assets and return of the investment portfolio of our products. There can be no assurance that any of MoonQuant’s products will not incur losses. There is no guarantee that any of MoonQuant’s products will earn a return. Investment in any of MoonQuant’s products carry a high degree of risk which may result in investors losing all of their invested capital. In addition, past performance does not guarantee future results.
Limited History
Although persons involved in the management of MoonQuant and its products and its service providers have had long experience in their respective fields of specialization, MoonQuant has a limited operating or performing history upon which prospective investors can evaluate the likely performance. Investors should be aware that the past performance by those involved in the investment management of MoonQuant’s products should not be considered as an indication of future results.
Fees and Expenses
MoonQuant is obligated to pay fees, brokerage commissions and legal, accounting, filing and other expenses regardless of whether it realizes profits.
Not a Public Mutual Fund
MoonQuants products are not subject to the restrictions or to the continuous disclosure obligations placed on mutual funds offered to the public to ensure diversification and liquidity of any of MoonQuant’s portfolios.
Changes in the Investment Objectives and Strategies
MoonQuant’s managers or Investment Advisor may alter any of MoonQuant’s investment objectives, strategies and restrictions without prior approval by the investors or subscribers.
Limited Ability to Liquidate Investment
There is no formal market for any of MoonQuants products. MoonQuant’s offering(s) is not qualified by way of prospectus, and consequently the resale of shares or participation in any of MoonQuant’s products is subject to restrictions under applicable securities legislation. In addition, subscriber and investor shares may not be assigned, encumbered, pledged, hypothecated or otherwise transferred except with the prior written consent by MoonQuant, which may be withheld at MoonQuant’s sole and absolute discretion. Accordingly, it is possible that investors/subscribers may not be able to resell their investments other than by way of redemption of their MoonQuant holdings on a Valuation Date. These redemptions will be subject to the limitations described under “Redemptions”. Investors/subscribers may not be able to liquidate their investments in a timely manner. As a result, an investment in tany MoonQuant products is suitable only for sophisticated investors who do not require liquidity for their investment and are able to bear the financial risk of the investment for an extended period of time.
Redemptions
There are circumstances in which MoonQuant may suspend or limit redemptions. Accordingly, MoonQuant investments may not be an appropriate investment for investors seeking liquidity. Substantial redemptions could require MoonQuant to liquidate positions more rapidly than otherwise desirable to raise the necessary cash to fund redemptions and achieve a market position appropriately reflecting a smaller asset base. Such factors could adversely affect the value of the investments redeemed and of the outstanding remaining investments.
Valuation of MoonQuant Investments
While the some of our products may be independently audited, valuation of MoonQuant investments may involve uncertainties and judgmental determinations and, if such valuations should prove to be incorrect, the Net Asset Value of any or all of our products could be adversely affected. Independent pricing information may not be available regarding certain MonnQuant’s investments.
There is risk that an investment in any of MoonQuants products by a new investor (or an additional investment by an existing investor) could dilute the value of investments for the other investors if the actual value of such investments is higher than the value designated by MoonQuant. The Manager does not intend to adjust the Net Asset Value of the Fund retroactively. The valuation of assets for the purpose of determining subscription and redemption prices and the calculation of applicable fees, may not be in accordance with IFRS but will generally be in accordance with industry practice.
Investors not Entitled to Participate in Management
Investors/subscribers are not entitled to participate in the management or control of MoonQuant’s products or its operations. Investors do not have any input into the MoonQuant products’ trading. The success or failure of any of MoonQuants products will ultimately depend on the direct or indirect investment of the assets of the MoonQuant product holdings by the Investment Advisor, with which investors/subscribers will not have any direct dealings.
Reliance on the Manager and/or the Investment Advisor
MoonQuant will be relying on the ability of the Manager and/or Investment Advisor to actively manage its investment decisions. There can be no assurance that satisfactory replacements for the Manager will be available, if either ceases to act as such. Termination of the Manager may terminate any or all MoonQuant products if no successor is appointed. Termination of the Investment Advisor will expose investors to the risks involved in whatever new investment management arrangements can be made.
Dependence of Manager and Investment Advisor on Key Personnel
Each of the Investment Advisor and or the Manager depends, to a great extent, on the services of a limited number of individuals in the administration of MoonQuant activities. The loss of such individuals for any reason could impair the ability of the Manager or the Investment Advisor (as the case may be) to perform its activities on behalf of MoonQuant.
Performance Fees
The Manager may receive Performance Fees in respect of its products, based upon appreciation, if any, in the product’s Net Asset Value. The Performance Fees theoretically may create an incentive for the Investment Advisor to make investments that are riskier or more speculative than would be the case if such fees did not exist. In addition, because the Performance Fees are calculated on a basis that includes unrealized appreciation of MoonQuant’s assets, it may be greater than if such compensation were based solely on realized gains.
Lack of Independent Experts Representing Investors/Subscribers
MoonQuant, the Manager and the Investment Advisor have consulted with a single legal counsel regarding the formation and terms of the product(s) offering. Investors/subscribers have not, however, been independently represented. Therefore, to the extent that MoonQuant, investors or this offering could benefit by further independent review, such benefit will not be available. Each prospective investor should consult his or her own legal, tax and financial advisors regarding the desirability and the suitability of participating in any of MoonQuants products.
No Involvement of Unaffiliated Selling Agent
No outside selling agent unaffiliated with the Manager has made any review or investigation of the terms of this offering, the structure of MoonQuant’s products or the background of the Manager.
Trading Errors
In the course of carrying out trading and investing responsibilities on behalf of MoonQuant, the Investment Advisor’s personnel may make “trading errors”, i.e., errors in executing specific trading instructions. Examples of trading errors include: (i) buying or selling an investment asset at a price or quantity that is inconsistent with the specific trading instructions generated by a particular strategy; or (ii) buying rather than selling a particular investment asset (and vice versa). Trading errors are an intrinsic factor in any complex investment process, and may occur notwithstanding the exercise of due care and special procedures designed to prevent trading errors. Trading errors are, therefore, distinguishable from errors in judgment, due diligence or other factors leading to a specific trading instruction being generated, as well as from unauthorized trading or other improper conduct by the Investment Advisor’s personnel. Consequently, the Manager will (unless the Manager otherwise determines) treat all trading errors (including those which result in losses and those which result in gains) as for the account of the corresponding MoonQuant product, unless they are the result of conduct by the Manager which is inconsistent with the Manager’s standard of care.
Possible Negative Impact of Regulation of Alternative Funds
The regulatory environment for alternative funds is evolving and changes to it may adversely affect MoonQuant’s products. To the extent that regulators adopt practices of regulatory oversight in the area of alternative funds that create additional compliance, transaction, disclosure or other costs for alternative funds, MoonQuant’s returns may be negatively affected. In addition, the regulatory or tax environment for derivative and related instruments is evolving and may be subject to modification by government or judicial action that may adversely affect the value of the investments held by MoonQuant. The effect of any future regulatory or tax change on any of MoonQuant’s portfolios is impossible to predict.
Early Termination
In the event of the early termination of any of MoonQuant’s products, MoonQuant will distribute to the investors/subscribers pro rata their interest in the assets available for such distribution, subject to the rights of the Manager to retain monies for costs and expenses. In addition, the assets held would have to be sold or distributed in kind of the investors/subscribers. It is possible that at the time of such sale or distribution certain securities would be worth less than the initial cost of such assets, resulting in a loss to the investors/subscribers.
General Economic and Market Conditions
The success of MoonQuant’s activities may be affected by general economic and market conditions, such as interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws, and national and international political circumstances. These factors may affect the level and volatility of prices and the liquidity MoonQuant’s investments. Unexpected volatility or illiquidity could impair the MoonQuant’s profitability or result in losses.
Fund of Funds Risk
MoonQuant may invest directly in, or obtain exposure to, special purpose vehicles or other investment funds as part of its investment strategy. Consequently, the Fund is also subject to the risks of these underlying funds.
Portfolio Turnover
MoonQuant product operations may result in a high annual portfolio turnover rate. There has been no limit placed on the rate of portfolio turnover and portfolio assets may be sold without regard to the time they have been held when, in the opinion of the MoonQuant’s Investment Advisor, investment considerations warrant such action. A high rate of portfolio turnover involves correspondingly greater expenses than a lower rate (for example, greater transaction costs such as brokerage fees).
Differences between Quoted and Actionable Market Prices
Many funds or investment products calculate their net asset values on the basis of marks received from dealers. However, it is not unusual especially in the case of certain less conventional instrument for the prices quoted by dealers for informational purposes to materially exceed the prices at which the same dealers are willing actually to enter into transactions. This discrepancy can cause material disruptions and unexpected net asset value declines when a fund is required to sell a position which it had been valuing based on dealers’ markets.
Liquidity Risk
Certain investments and types of investments are subject to restrictions on resale, may trade in the over-the-counter market or in limited volume, or may not have an active trading market. Illiquid securities may trade at a discount from comparable, more liquid investments and may be subject to wide fluctuations in market value. It may be difficult for the MoonQuant product administrator to value illiquid securities accurately. Also, the Investment Advisor may not be able to dispose of illiquid securities or execute or close out a derivatives transaction readily at a favorable time or price or at prices approximating those at which the portfolio currently values them. Illiquid securities also may entail registration expenses and other transaction costs that are higher than those for liquid securities. In instances where the liquidity of the portfolio is restricted or compromised, the Manager has the ability and may deem it necessary to place restrictions upon or otherwise limit client redemptions or alternatively to process client redemptions in-kind or partially in-kind or to delay or postpone payment of redemptions.
Concentration
The Manager may take concentrated positions of certain cryptoassets involving greater risk and volatility than other investments since the performance of one particular cryptoasset could significantly and adversely affect the overall performance of MoonQuant’s products.
Hedging
Although a hedge is intended to reduce risk, it does not eliminate risk entirely. A hedging strategy may not be effective. A hedge can result in a loss in the case of an extraordinary event. There are several such possible cases including, but not limited to: (i) lack of liquidity during market panics, (ii) imperfect correlation between the underlying asset of the derivative and the asset being hedged, (iii) default of counterparties. To protect the MoonQuant’s capital against the occurrence of such events, the Manager will attempt to maintain a diversified portfolio.
Derivatives Trading
MoonQuant intends to trade in derivative financial instruments, including, without limitation, options, swaps, and forward contracts, and may use derivative techniques for hedging and for other trading purposes, including for the purpose of obtaining the economic benefit of an investment in an entity without making a direct investment. The risks posed by such instruments and techniques, which can be extremely complex and may involve leveraging of the MoonQuant’s portfolio(s), include: (i) credit risks (the exposure to the possibility of loss resulting from a counterparty’s failure to meet its financial obligations); (ii) market risk (adverse movements in the price of a financial asset or commodity); (iii) legal risks (the characterization of a transaction or a party’s legal capacity to enter into it could render the financial contract unenforceable, and the insolvency or bankruptcy of a counterparty could pre-empt otherwise enforceable contract rights); (iv) operations risk (inadequate controls, deficient procedures, human error, system failure or fraud); (v) documentation risk (exposure to losses resulting from inadequate documentation); (vi) liquidity risk (exposure to losses created by inability to prematurely terminate the derivative); (vii) system risk (the risk that financial difficulties in one institution or a major market disruption will cause uncontrollable financial harm to the financial system); (viii) concentration risk (exposure to losses from the concentration of closely related risks such as exposure to a particular industry or exposure linked to a particular entity); and (ix) settlement risk (the risk faced when one party to a transaction has performed its obligations under a contract but has not yet received value from its counterparty). In addition, governments from time to time intervene, directly and by regulation, in certain markets. Such intervention is often intended to influence prices directly which may negatively affect tMoonQaunt’s performance. MoonQuant’s products are also indirectly subject to the risk of failure of any of the exchanges on which such contracts trade or of the exchange’s clearinghouses, if any.
Options
Selling call and put options is a highly specialized activity and entails greater than ordinary investment risk. The risk of loss when purchasing an option is limited to the amount of the purchase price of the option; however investment in an option may be subject to greater fluctuation than an investment in the underlying asset or derivative. In the case of the sale of an uncovered option there can be potential for an unlimited loss. To some extent this risk may be hedged by the purchase or sale of the underlying asset or derivative.
Cybersecurity Risks
Cybersecurity incidents and cyber-attacks have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in the future. The Manager will seek to prevent and mitigate any such incidents but there is no guarantee that it will be successful in such efforts. A cybersecurity incident could have numerous material adverse effects on MoonQuant’s products. Such incidents could impair the operations, liquidity and financial condition of the portfolios, amongst other potential threats and risks. Cyber threats and/or incidents could cause financial costs from the theft of assets (including proprietary information and intellectual property) as well as numerous unforeseen costs including, but not limited to: litigation costs, preventative and protective costs, remediation costs and costs associated with reputational damage.
Cryptocurrencies
Cryptocurrency exchanges have in the past been closed due to fraud, failure or security breaches. In many of these instances, the customers of such cryptocurrency exchanges were not compensated or made whole for the partial or complete losses of their account balances. Any assets that reside on a cryptocurrency exchange that shuts down may be lost. The methodologies for determining a cryptocurrency’s market price are new and untested. Such methodologies may now or in the future contain inherent flaws that may adversely affect the ability to determine a cryptocurrency’s market price. Cryptocurrencies are created, issued, transmitted and stored according to protocols run by computers in a cryptocurrency network. It is possible these protocols have hidden flaws that could result in the loss of some or all assets held by MoonQuant. There may also be network scale attacks against these protocols or server hosts that result in the loss of some or all of assets held by the Fund. Some assets held by the Fund may be created, issued or transmitted using experimental cryptography which could have underlying flaws. Advancements in quantum computing could break the cryptographic rules of protocols that support the assets held by MoonQuant. MoonQuant makes no guarantees about the reliability of the cryptography used to create, issue or transmit assets. The impact of geopolitical events on the supply and demand for cryptocurrencies is uncertain. The further development and acceptance of the cryptographic, algorithmic, and other applicable protocols governing the issuance of and transactions in cryptocurrencies, which represents a new and rapidly changing industry, is subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of these protocols may adversely affect any investment in a cryptocurrency. Currently, there is relatively small use of cryptocurrencies in the retail and commercial marketplace in comparison to relatively large use by speculators (including, but not limited to, high frequency traders using automated trading systems seeking to take advantage of arbitrage opportunities in cryptocurrencies and the various cryptocurrency exchanges), thus contributing to price volatility.
Fluctuations in the Market Price of Cryptocurrencies
The value of MoonQuant’s products relates directly to the value of the cryptocurrencies held directly or indirectly, and fluctuations in the price of cryptocurrencies could materially and adversely affect an investment in a MoonQuant product. Several factors may affect the price of cryptocurrencies, including: the total number of cryptocurrencies in existence; global demand; global supply; investors’ expectations with respect to the rate of inflation of fiat currencies; investors’ expectations with respect to the rate of deflation of cryptocurrencies; interest rates; currency exchange rates, including the rates at which cryptocurrencies may be exchanged for fiat currencies; fiat currency withdrawal and deposit policies of cryptocurrency exchanges and liquidity of such cryptocurrency exchanges; interruptions in service from or failures of major cryptocurrency exchanges; cyber theft of cryptocurrencies from online digital wallet providers, or news of such theft from such providers or from individuals’ digital wallets; investment and trading activities of large investors; monetary policies of governments, trade restrictions, currency devaluations and revaluations; regulatory measures, if any, that restrict the use of cryptocurrencies as form of payment or the purchase of cryptocurrencies on the market; the availability and popularity of business that provide cryptocurrency-related services; the maintenance and development of the open-source software protocol of the cryptocurrency network; increased competition from other forms of cryptocurrency or payments services; global or regional political, economic or financial events and situations; expectations among cryptocurrency economy participants that the value of cryptocurrencies will soon change; and fees associated with processing a cryptocurrency transaction.
In addition, investors should be aware that there is no assurance that cryptocurrencies will maintain their long-term value in terms of future purchasing power or that the acceptance of cryptocurrency payments by mainstream retail merchants and commercial businesses will continue to grow. In the event that the price of cryptocurrencies declines, the Manager expects the value of an investment in MoonQuant to decline proportionately.
Cryptocurrencies represent a speculative investment and involve a high degree of risk. As relatively new products and technologies, cryptocurrencies have not been widely adopted as a means of payment for goods and services by major retail and commercial outlets. Conversely, a significant portion of the demand for cryptocurrencies is generated by speculators and investors seeking to profit from the short or long-term holding of cryptocurrencies. The relative lack of acceptance of cryptocurrencies in the retail and commercial marketplace limits the ability of end-users to pay for goods and services with cryptocurrencies. A lack of expansion by cryptocurrencies into retail and commercial markets, or a contraction of such use, may result in increased volatility.
Momentum Pricing
Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for anticipated future appreciation in value. The Manager believes that momentum pricing of cryptocurrencies has resulted, and may continue to result, in speculation regarding future appreciation in the value of cryptocurrencies, inflating and making the market price of cryptocurrencies more volatile. As a result, cryptocurrencies may be more likely to fluctuate in value due to changing investor confidence in future appreciation or depreciation in the market price of cryptocurrencies.
Market Adoption
Currently, there is relatively small use of cryptocurrencies in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect an investment in MoonQuant products. Cryptocurrencies and the cryptocurrency network have only recently become accepted as a means of payment for goods and services by certain major retail and commercial outlets, and use of cryptocurrencies by consumers to pay such retail and commercial outlets remains limited. Conversely, a significant portion of cryptocurrency demand is generated by speculators and investors seeking to profit from the short or long-term holding of cryptocurrencies. A lack of expansion by 34 cryptocurrencies into the retail and commercial markets, or a contraction of such use, may result in increased volatility or a reduction in the market price of cryptocurrencies. Further, if fees increase for recording transactions in the blockchain, demand for cryptocurrencies may be reduced and prevent the expansion of the cryptocurrency network to retail merchants and commercial businesses, resulting in a reduction in the price of cryptocurrencies.
Changes to Prominence of Cryptocurrencies and other Digital Assets
Demand for cryptocurrencies is driven by its status as the most prominent and secure digital asset. It is possible that a digital asset other than a cryptocurrency could have features that make it more desirable to a material portion of the digital asset user base, resulting in a reduction in demand for cryptocurrencies, which could have a negative impact on the price of cryptocurrencies.
The cryptocurrency network and cryptocurrencies, as an asset, hold a “first-to-market” advantage over other digital assets. This first-to-market advantage is driven in large part by having the largest user base and, more importantly, the largest combined mining power in use to secure the blockchain and transaction verification system. Having a large mining network results in greater user confidence regarding the security and long-term stability of a digital asset’s network and its blockchain; as a result, the advantage or more users and miners makes a digital asset more secure, which makes it more attractive to new users and miners, resulting in a network effect that strengthens the first-to-market advantage.
Despite the market first-mover advantage of the cryptocurrency network over other digital assets, it is possible that an altcoin could become materially popular due to either a perceived or exposed shortcoming of the cryptocurrency network protocol that is not immediately addressed by the core developers or a perceived advantage of an altcoin that includes features not incorporated into cryptocurrencies. If an altcoin obtains significant market share (either in market capitalization, mining power or use as a payment technology), this could reduce a cryptocurrency’s market share and have a negative impact on the demand for, and price of, cryptocurrencies.
Regulatory Framework relating to Cryptocurrencies
It may be illegal, now or in the future, to own, hold, sell or use cryptocurrencies in one or more countries. Although currently cryptocurrencies are generally either not regulated or lightly regulated in most countries, one or more countries may take regulatory actions in the future that severely restricts the right to acquire, own, hold, sell or use cryptocurrencies or to exchange cryptocurrencies for fiat currency. Such an action may restrict the MoonQuant’s ability to hold or trade cryptocurrencies, and could result in termination and liquidation of MoonQuant’s products at a time that is disadvantageous to investors/subscribers, or may adversely affect investments. Regulators have already imposed certain conditions on investment fund managers and on portfolio managers that carry out business related to investment funds investing in cryptocurrencies. Additional conditions may be imposed on investment fund managers, portfolio managers or on any other person that may adversely affect MoonQuant’s products.
The tax rules applicable to an investment in cryptocurrency may be uncertain and the tax consequences to MoonQuant’s products of an investment in a cryptocurrency could differ from the MoonQuant’s expectations (if any).
Risk of Loss of Private Key
Cryptocurrencies are controllable only by the possessor of unique private keys relating to the addresses in which the cryptocurrencies are held. The theft, loss or destructions of a private key required to access a cryptocurrency is irreversible, and such private keys would not capable of being restored by MoonQuant. Any loss of private keys relating to digital wallets used to store cryptocurrencies held by MoonQuant could result in the loss of the cryptocurrencies controlled by such private key.
Risk of Loss, Theft or Destruction of Cryptocurrencies
There is a risk that some or all of the cryptocurrencies held by MoonQuant could be lost, stolen or destroyed. If the cryptocurrencies are lost, stolen or destroyed under circumstances rendering a party liable to MoonQuant, the responsible party may not have the financial resources sufficient to satisfy MoonQuant’s claim. Also, although the cryptocurrency Custodians uses security procedures with various elements, such as redundancy, segregation and cold storage, to minimize the risk of loss, damage and theft, neither the cryptocurrency Custodians nor the Manager can guarantee the prevention of such loss, damage or theft, whether caused intentionally, accidentally or by an act of God. Access to the cryptocurrencies could also be restricted by natural events (such as an earthquake or flood) or human actions (such as a terrorist attack).
Trading on Cryptocurrency Networks
MoonQuant may assist investors/subscribers to convert cash contributions to various cryptocurrencies through exchanges and/or over the relevant network specific to a particular cryptocurrency. These cryptocurrency transactions will generally occur on online, end-user-to-end-user networks that host public transaction ledgers, known as the blockchain, and the source code that comprises the basis for the cryptographic and algorithmic protocols governing the relevant cryptocurrency. For an online cryptocurrency transaction, the purchaser must generally provide its public key, which serves as an address for the digital transaction, to the party initiating the transfer (the seller). Then the participants in the transaction must “sign” the transaction with a data code derived from entering the private key, which signature serves as validation that the transaction has been authorized by the participants. Although to date, the cryptography used to secure these digital transactions has been resistant to unauthorized interference, this process is theoretically vulnerable to hacking and malware, and could lead to theft of digital assets and the loss of the cryptocurrencies.
Response to Changing Security Needs
As technological change occurs, the security threats to cryptocurrencies will likely adapt and previously unknown threats may emerge. MoonQuant’s ability to adopt technology in response to changing security needs or trends may pose a challenge to the safekeeping of cryptocurrencies. To the extent that MoonQuant or the cryptocurrency Custodians are unable to identify and mitigate or stop new security threats, the cryptocurrencies may be subject to theft, loss, destruction or other attack.
Irrevocability of Cryptocurrency Transaction
Cryptocurrency transactions are irrevocable and stolen or incorrectly transferred cryptocurrencies may be irretrievable. Cryptocurrency transactions are not reversible without the consent and active participation of the recipient of the transaction. Once a transaction has been verified and recorded in a block that is added to the blockchain, an incorrect transfer of cryptocurrencies or a theft of cryptocurrencies generally will not be reversible and MoonQuant may not be capable of seeking compensation for any such transfer or theft. To the extent that MoonQuant is unable to seek a corrective transaction with the third party or is incapable of identifying the third party that has received the cryptocurrencies through error or theft, MoonQuant will be unable to revert or otherwise recover incorrectly transferred cryptocurrencies. Moonquant will also be unable to convert or recover cryptocurrencies transferred to uncontrolled accounts.
Potential Failure to Maintain the Cryptocurrency Network
The cryptocurrency network operates based on an open-source protocol maintained by the core developers of the cryptocurrency network and other contributors dedicated to cryptocurrency development. As the cryptocurrency network protocol is not sold and its use does not generate revenues for its development team, the core developers are generally not compensated for maintaining and updating the cryptocurrency network protocol. Consequently, there is a lack of financial incentive for developers to maintain or develop the cryptocurrency network and the core developers may lack the resources to adequately address emerging issues with the cryptocurrency network protocol. Although the cryptocurrency network is currently supported by the core developers, there can be no guarantee that such support will continue or be sufficient in the future. To the extent that material issues arise with the cryptocurrency network protocol and the core developers and opensource contributors are unable to address the issues adequately or in a timely manner, the cryptocurrency network and an investment in any or all of MoonQuant’s products may be adversely affected.
Internet Disruptions
A disruption of the internet may affect cryptocurrency operations, which may adversely affect the cryptocurrency industry and an investment in MoonQuant products. Cryptocurrency networks’ functionality relies on the internet. A significant disruption of internet connectivity (i.e., affecting large numbers of users or geographic regions) could prevent cryptocurrency networks’ functionality and operations until the internet disruption is resolved. An internet disruption could adversely affect an investment in MoonQuant products or their ability to operate.
Coercion or Takeover of Mining Process
Entities engaged in the mining process could be coerced into acting in a manner detrimental to a cryptocurrency’s network. If a nation state or other large and well-capitalized entity wanted to damage a cryptocurrency network, an attack could be attempted on that cryptocurrency’s miners. The attacking entity could attempt to coerce, by legal or illegal means, cryptocurrency miners who, in the aggregate, control more than 50 percent of a cryptocurrency’s mining capacity into manipulating the blockchain in a manner detrimental to that cryptocurrency’s network. Such an attack could adversely affect an investment in any or all of MoonQuant’s products, its the ability to operate, or a particular cryptocurrency’s exchanges to operate.
Collusion among Miners
A cryptocurrency’s miners could act in collusion to raise transaction fees, which may adversely affect the usage of a particular cryptocurrency network. Cryptocurrency miners, functioning in their transaction confirmation capacity, collect fees for each transaction they confirm. Miners validate unconfirmed transactions by adding the previously unconfirmed transactions to new blocks in the blockchain. Miners are not forced to confirm any specific transaction, but they are economically incentivized to confirm valid transactions as a means of collecting fees. Miners have historically accepted relatively low transaction confirmation fees, because miners have a very low marginal cost of validating unconfirmed transactions. If miners collude in an anticompetitive manner to reject low transaction fees, then cryptocurrency users could be forced to pay higher fees, thus reducing the attractiveness of a particular cryptocurrency’s network. Cryptocurrency mining occurs globally and it may be difficult for authorities to apply antitrust regulations across multiple jurisdictions. Any collusion among miners may adversely impact the attractiveness of a cryptocurrency network and may adversely impact an investment in any or all of MoonQuant’s products or its ability to operate.
Early Adopter Selloff
It is possible that a small group of a particular cryptocurrency’s adopters control large amounts of an existing cryptocurrency. To the extent these individuals sell their stakes in a cryptocurrency, the price of that cryptocurrency may decline. It is possible that a small group of early cryptocurrency adopters hold a significant proportion of any particular cryptocurrency that has thus far been created. There are no regulations in place that would prevent a large holder of a particular cryptocurrency from selling their holdings. Such large sales may adversely affect the price of a cryptocurrency and an investment in any or all of MoonQuant’s products.
Manipulation
Foreign jurisdictions may seek to manipulate currency prices. Any such manipulation are difficult to predict and may have a material adverse effect in any or all of MoonQuant’s products.
IP Rights Claims May Adversely Affect the Operation of Cryptocurrency Network
Third parties may assert intellectual property claims relating to the operation of cryptocurrencies and their source code relating to the holding and transfer of such assets. Regardless of the merit of any intellectual property or other legal action, any threatened action that reduces confidence in a cryptocurrency network’s long-term viability or the ability of end-users to hold and transfer the relevant cryptocurrency may adversely affect any or all of MoonQuant’s products. Additionally, a successful intellectual property claim could prevent MoonQuant from accessing the cryptocurrency network or holding or transferring their cryptocurrency, which could force MoonQuant to terminate and liquidate its cryptocurrencies (if such liquidation is possible).
Legal Risk
Legal, tax and regulatory changes to laws or administrative practice could adversely affect MoonQuant’s products. For example, it may be illegal, now or in the future, to own, hold, sell or use cryptocurrencies in one or more countries. Although currently cryptocurrencies are generally either not regulated or lightly regulated in most countries, one or more countries may take regulatory actions in the future that severely restricts the right to acquire, own, hold, sell or use cryptocurrencies or to exchange cryptocurrencies for fiat currency. Such an action may restrict MoonQuant’s ability to hold or trade cryptocurrencies, and could result in termination and liquidation of any or all of MoonQuant’s products at a time that is disadvantageous to investors/subscribers, or may adversely affect investments.
In light of the foregoing there can be no assurance that MoonQuant’s investment objectives will be achieved or that the Net Asset Value at redemption will be equal to or more than a purchaser’s original cost.