5 Major Risks Of Cryptocurrency Trading

Volatility: riding the cryptocurrency roller coaster

Cryptocurrency prices are notoriously unstable, which means they are subject to sudden changes. Because of this, knowing when to buy and sell could be difficult, which could lead to significant losses.

Cryptocurrencies like Bitcoin and Ethereum are known for their price volatility. Unlike traditional investments like stocks or bonds, cryptocurrencies are not backed with any asset, due to which cryptocurrencies are even more volatile than stocks. While volatility might offer chances for substantial gains. Here are the top 10 crypto exchanges through which you can start investing in cryptocurrency.

One obvious example is the 2017 Bitcoin price crash when its value dropped from about $20,000 to under $4,000 in a few weeks. Due to this volatility, it can be challenging to choose profitable trading opportunities because price projections can often be drastically off.

Regulation: navigating uncharted waters

Since most governments or financial institutions do not regulate cryptocurrencies properly, they are not under any kind of supervision. This may make the recovery of lost funds or the resolution of disputes challenging.

The world of cryptocurrencies functions very unexplored and decentralized, in contrast to traditional financial systems, which are highly controlled. For traders, there are a variety of dangers associated with the lack of a central authority or regulatory organization. For instance, there is no established legal framework to rely on for settlement in cases of fraud, theft, or disagreements with exchanges or other users. When dealing with problems with their Bitcoin holdings, traders can find themselves without many options.

One notable instance is the 2014 collapse of the Mt. Gox exchange, which cost over 850,000 Bitcoins (worth billions of dollars at the time) its value. This disastrous event was made possible by a lack of regulatory control, which prevented many traders from getting their money back.

Errors and hacking: protecting your digital assets

Exchanges and wallets for cryptocurrencies are prone to hacking and other mistakes. This may result in money being stolen or account access being lost.

Risks associated with cybersecurity risks are quite real in the realm of Bitcoin trading. Wallets and exchanges, which are crucial trading instruments, are susceptible to hacking and technological issues. A breach may cause users' money to be stolen or their access to their accounts to be lost.

One ominous case is the 2016 attack on the Bitfinex exchange, during which thieves stole almost 120,000 Bitcoins. Such breaches could have disastrous repercussions for traders who keep their funds on these sites.

Forks and discontinuation: the uncertain future of cryptocurrencies

Cryptocurrencies may split into new ones or cease to exist entirely. Investors who own the forked or canceled coin may suffer losses as a result.

Since cryptocurrencies can vary significantly, there are both opportunities and risks for investors. They are not static entities. Forks, in which a cryptocurrency separates into two distinct coins, can cause market turbulence and uncertainty. The original coin's owners might suddenly find themselves in possession of a new, possibly less-valued object.

Additionally, several cryptocurrency developers have stopped supporting or abandoned them, making them useless. To successfully navigate this changing environment, one must exercise caution and keep up with recent changes in the Bitcoin industry.

Margin trading: magnifying gains and losses

Borrowing money to increase trading positions is a widespread activity known as margin trading in cryptocurrency markets. Although this tactic has the potential to generate big profits, it also carries sizable hazards. Trading on margin increases both earnings and losses, so investors may lose more than they initially put up.

Margin trading can easily put inexperienced traders in financial trouble if they don't fully comprehend the hazards involved. Margin trading should only be entered cautiously and after thoroughly grasping the underlying principles.

Best cryptocurrency exchanges

1

9.4/10

Go to broker

Your capital is at risk.

Minimum deposit:

$1

Review

The Binance exchange is one of the largest cryptocurrency exchanges in the world with its headquarters in Hong Kong. According to the CoinMarketCap cryptocurrency portal, Binance holds the top spot in terms of aggregate indicators of the platform's daily turnover, the number of novices and active users, liquidity, and web traffic (ranking, queries, statistics in search engines, etc.). The exchange is also a cryptocurrency startup that has its own “native asset” used in the Binance ecosystem as the “basis gas” (payment internal unit). More about Binance Card

Pros/Cons

•low commissions due to liquidity and trading volumes.

•high platform performance;

•proprietary BNB Coin which allows Binance to reduce the commission size;

•a proprietary cold wallet guarantees the security of your crypto assets by storing them.

•complex verification procedure;

•the exchange is not licensed by a regulator;

•The platform can go offline without warning;

•there are complaints about the technical functionality of the platform;

•there is an intricate mechanism for calculating commissions and rewards (grid system Maker/Taker).

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2

9.2/10

Go to broker

Your capital is at risk.

Minimum deposit:

₮1

Review

The BitGet crypto exchange provides traders with the opportunity to trade in spot, futures, and cryptocurrency. Cryptocurrency is used exclusively as instruments at the exchange: BTC (₿), LTC (Ł) ETH (Ξ), USDT (₮) and others. Trades are carried out on the crypto exchange’s own platform, which is available as a web terminal and an application for mobile devices. BitGet's fees are lower than its competitors in the market, with maker fees of 0.02% and takers of 0.06%. The commission can also be paid with bonus funds that each BitGet client receives upon registration, verification, and a trading account replenishment. There are no fees for maintaining an account, but a commission is charged upon withdrawal, the amount of which depends on the cryptocurrency in which the withdrawal is made. For investors, BitGet offers its own service for copying trades, and it is available at the exchange and at an affiliate program. Novice traders can use demo accounts to hone their trading skills, but there are no educational materials on the website. The BitGet cryptocurrency exchange provides services on an international level and cooperates with traders from different countries.

Pros/Cons

•availability of demo accounts;

•convenient ways to contact the support service;

•a wide range of cryptocurrencies for account replenishment;

•service of copying trades for receiving passive income;

•ability to reduce commissions using credits earned in the bonus program;

•ability to engage in algorithmic trading;

•the exchange uses hot and cold cryptocurrency wallets to store client funds.

•Deposits and withdrawals in fiat currencies are not available.

•There are no educational materials for novice traders on the exchange website.

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