Main Risks To Crypto Trading

As it is well said in terms of shared markets, “More the Risk-More is the Profit”. But, with the greater Risk comes the greater Loss as well.

Despite the number of benefits cryptocurrencies provide there are also a few risks associated with them, which one must be aware of and prepared to tackle.

What are the Main Risks to Crypto Trading?

• Volatile nature of the virtual market — Due to more liquidity on digital platforms, the value of cryptocurrencies becomes more volatile. It means anytime, within hours or minutes the value of the currency can change and if the investor is not prepared for such changes, it may pose to serious loss.
• Regulatory Risks — Since there is no central authority involved in crypto-trading, hence there is nobody who is answerable during the financial crisis. Also, there is no discipline regarding the time or amount of money a person is investing. On DE-Fi platforms people can invest anytime and anywhere they wish.
• Cyber-Risks — In the manual markets where cash or money is stored in equity, it would be hard for a thief to steal money. Also, there are ways of retaining money through various operational policies, but, in the case of cryptocurrencies, transactions are irreversible which allows the hacker or thief to get away with the investor’s cash very easily and perhaps with anonymity.
• Market Risks — Just like other shared markets, cryptocurrencies and De-Fi markets are also subjected to market risks. With the turbulence in the flow of market value of cryptocurrencies oscillates more often than that of tangible forms of money. This makes the loss unpredictable.
• Loss of Private Keys — Crypto transactions are based on Private-Keys that operate the transaction. Loss of private wallet keys means direct access to the amount present in one’s wallet.
• Tax-Based Concerns — The transaction of the crypto-assets are subjected to value-added tax or (VAT).
• Legal Issues — Depending upon the jurisdictions of independent nations any cryptocurrency may or may not be recognized as a legal asset. Hence, during recessions or inflations on virtual platforms, the government cannot directly take any actions.

How to Minimize Risk in Crypto-Trading

• Before investing your money make sure you do enough research and know the chances of profit and loss.
• Invest according to affordable risk.
• Investing in multiple cryptocurrencies can minimize the risk factor
• Planning entry exit should be a vital part of your Risk-Management Strategy.
• Analyse your risk and reward ratios carefully before you invest.

Final Thoughts

Every investment brings some promising gains with a few losses. Being aware of the pros and cons of Crypto-Trading can help you to invest smartly with the minimum and affordable risks. We are at Kointrack, making blockchain technology accessible to people.