Volatility is often considered the biggest risk in investing in cryptocurrencies. Even Bitcoin (BTC 0.65%), the world’s most valuable cryptocurrency, endured 70%-80% peak-to-trough declines during the crypto crashes in 2017-2018 and 2021-2022. However, many investors often overlook another major risk: the fact that you could suddenly lose access to your own tokens.

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Don’t ignore the counterparty risk

Cryptocurrencies are often marketed as “decentralized,” but they’re actually dependent on layers of centralized platforms, such as exchanges, custodians, lending platforms, and stablecoin issuers. If those platforms fail, you could be locked out of your crypto holdings — even if the underlying tokens continue…