What are the risks of Crypto trading? – MoneySense

Amazing profits can be made, but there are also huge losses, and investors need to understand the risks of crypto. Here is an overview of crypto variables, technological threats, regulatory instability and other factors that may affect the value of your investment.

Price fluctuations

Cryptocurrency prices can fluctuate from week to week, or even in a day. On May 19, 2021, for example, after the Chinese government took drastic measures against bitcoin mining and trading, Bitcoin prices fell 30%.

Crypto prices can also increase or decrease depending on a variety of factors, such as changing public sentiment, world news, major adoption, protocol modification, upcoming regulation, hacking, fraud and more. ተጨማሪ ያንብቡ ግምገማ ከማስገባትዎ በፊት ይህን መተግበሪያ መጫን አለብዎት። In addition, crypto is a relatively new asset class, and the market is still in the process of price acquisition.

Technology hazards

Crypto Currency Basic blockchain technology is built on a number of security measures, including decentralized management, cryptography, and mutual agreement mechanisms. However, no blockchain is free of every threat.

Regular storage and safe storage of your crypto wallet can help protect you from computer crashes, device theft, and personal mistakes – such as accidental uninstalling your digital crystal wallet. But it is also very difficult to protect against threats such as software errors, data crashes and 51% attacks (when the Crypto Mining team controls more than half of the network computing power).

Crypto investors and developers are concerned about quantum computing, the next development of computer technology. The computing power allows bad players to change their trading records, create cryptocurrencies, create transactions, or rewrite blockchain components. If so, crypto values ​​will fall — and even disappear. That day may still be many years away, but Ethereum and other crypto companies are working on post-quantum cryptography.

Low fluidity

Fluid is how easily and quickly you can exchange assets for cash. Crypto currencies – especially small, new ones – are less liquid than investments such as stocks and bonds. That means you may not be able to trade or withdraw money with your digital coins as fast as you would like, even though crypto markets around the world operate in the afternoon.

As a result, you may experience a “slide” —the difference between the price you expect and the price you receive after the transaction. If the bid is extended — the difference between buyers willing to pay and sellers willing to accept — while waiting for your business to complete, there may be a slip if it changes too often. When the actual price is below expectations, your purchasing power increases; This is called “positive sliding.” When the actual price is higher than expected, your purchasing power will be reduced; This is called “negative sliding.”

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