What risks are you going to face when trading cryptocurrencies?

risks are you going to face when trading cryptocurrencies

Investing in cryptocurrencies continues to boom, the attractiveness of these digital currencies arouses the investment interest of millions of people around the world. However, many of these people do not know the most important risks of investing in them. An investment that can be very profitable and positive, but which, depending on the experience of the trader, can carry serious risks.

The risks of investing in cryptocurrencies

No, we don’t want to scare you. As you already know, every investment carries a series of risks that you must assume. However, cryptocurrencies are a different asset: digital currency, in addition to being a relatively new product in the markets, has special characteristics that you should know about. They are as follows.

1. Lack of regulation by organisms

These cryptocurrencies are not regulated by anybody. In other words, they are not supervised by either governments or central banks. This has a positive side, which is the absence of interventionist agencies that alter the price. However, the worst comes if you have a problem with this speculation or investment: you do not have the official backing of the central banks. There have been cases of fraud, price manipulation and other illegal activities.

2. Exposure to possible cyber attacks that steal data or money

In recent months, cryptocurrencies have been the target of different cyberattacks with the theft of millions of dollars in bitcoins and other virtual currencies. Attacks that are highly organized, by professional hackers and from the most remote parts of the world.

3. Volatile and illiquid cryptocurrencies

The volatility is used by many investors to speculate and get quick profits, but traders are unfamiliar with large fluctuations, which affects not only the quality of the operation but also the mood of the trader. Also, with so many movements, a large amount of money can be lost in a short time, getting caught in the currency or executing our stop loss.

In addition, this volatility produces important gaps upward or downward, that is, prices jump quickly and thus complicate the technical analysis. Finally, volatility can also cause serious liquidity problems. That is, there are many sales and few people willing to buy, which causes an added problem when setting prices.

4. Invest in cryptocurrencies and suffer system interruptions

They are known as breaks or forks. Each trader must be familiar with both terms, especially with forks, which are highly known as they do not have real prices in the underlying market.

5. The costs of investing

Keep in mind that many intermediaries raise their commissions if you want to invest in cryptocurrencies. The cost of operations must be considered, subtracting it from the profitability that it can generate. Commissions are applied by all brokers and we must always consider that they reduce profits.

6. Little transparency

Do not trust intermediaries who assure you high returns. Because yes, you can earn a lot of money speculating or investing in cryptocurrencies, but most likely they hide the risks of gambling with virtual currencies. Flee technical language, demand great information about the currency and, on the other hand, know your needs.

Cryptocurrencies are one more option to invest in. However, these digital currencies have a different operation and, in addition, they carry a series of risks that you should be aware of. To avoid these problems,