Cryptocurrency trading is not risk-free!

Nothing comes free of risks. Cryptocurrency trading is a lucrative platform, which involves high risks and high profits. In the current scenario, there exists no asset class, which is this lawless, yet has huge returns. The exorbitant price rallies of bitcoin and Ethereum this year, illustrates how powerful these digital assets are. With high profits, comes the high risks. The crypto investors face a multitude of them in this extensively immature and unregulated market. Click to read more about the possible risks associated with Crypto trading.

Market risks:

Cryptocurrencies belong to an extremely volatile asset class. Even though the volatility of the bitcoin has reduced substantially over time, as the world’s leading digital currency has matured into a universally accepted investment asset, other cryptocurrencies still undergo intra-trade price movement of more than 50% in either direction. The cryptocurrency market is largely driven by news, and so, the individual characteristics of the digital currencies, sensational headlines and malicious media campaigns against the cryptocurrencies by their rival blockchain projects can greatly influence the intra-day and intra-week price movements. Diversification and hedging the portfolio with BTC futures are the ways to overcome the market risks.

Liquidity risks:

Liquidity is vital for any market. The lack of cash flow creates an imbalanced environment and things can go out of our control. Following the immense popularity attained by the cryptocurrencies, many people have given a shot to try their hands on a cryptocurrency exchange. Not every exchange is the same, each one has different trading pairs and trading volumes, as a result of which the liquidity of every exchange differs.

Regulatory risk:

The market gets rattled every time, a major bitcoin hub announces adverse bitcoin regulations. The decentralized currencies, currently, doesn’t have any controlling bodies and so, the lawmakers of the major bitcoin economies like the UK, China can greatly influence the price movement of cryptocurrencies. It is sadly not possible to mitigate the regulatory risks. All we can do is to keep a close eye on news about bitcoins and potential policy changes that could impact the crypto holdings.

Fraud risks:

Bitcoin investment schemes are highly promoted through social media. This gives rise to the fraudulent and scammers who launch initial coin offerings, to dupe new investors out of the money. It is better not to invest in any of the online cryptocurrency tools before attaining first-hand knowledge and deeper insights about it.