Kraken will monitor its Canadian clients’ loss limits. This article will explain loss limits and how they work.
What is a loss limit?
Kraken’s Canadian clients are now required to fill out an investor questionnaire. You will be assigned a “loss limit” threshold based on your answers to the questionnaire. For example, depending on the risk profile demonstrated by your answers, you may be assigned a loss limit of 20%, 50% or 75%.
Kraken will notify you by email if the value of one or more of the crypto holdings in your portfolio falls below your assigned loss limit threshold in a weekly period.
Kraken will not take any action other than notifying you that your loss limit has been exceeded. In other words, Kraken will not liquidate or close out your positions based on your loss limit.
Example
If you have a 10% loss limit and hold a portfolio of 100% ETH the following will apply:
On day 1, ETH price is $1000. On day 7, ETH price drops to $899, or by 10.1%. You will be notified by email that your loss limit has been exceeded. It is up to you to determine whether to take action based on this notification.