Risks associated with the trading of digital asset are quite enormous and one needs to be very careful before embarking on it. It is therefore important that traders understand such risks before entering into the world’s most interesting financial asset.
In today’s world, it’s no longer news to say cryptos are now the game changers in today’ss financial system.
There are now ATMs for transacting in cryptos globally, including one in Nigeria showing its importance in today’s society.
At the time of writing this, the crypto market is worth over $365 billion and has a trading volume of about $49 billion. These metrics reveal how much capital global investors are pumping into a market less than two decades old.
That said, it is important to note that crypto carries certain risks, like other financial assets. Hence, it’s advisable for readers to understand such risks before venturing into the world’s arguably most interesting financial asset.
A good number of exchanges have been hacked and large amounts of money lost due to crypto-related hacking incidents. In 2020, over $1.4billion has been stolen so far. Recently, the Kucoin exchange was hacked and over $150m worth of tokens were taken.
Note that when exchanges are hacked, traders and investors’ assets are safe. Although, not a good remark for the new industry.
Nigeria Community Manager at Crypto.com in a note to Nairametrics, spoke on key risks prevalent in the crypto market.
“Investing in the high volatile cryptocurrency market is a risky undertaking and one needs to learn about proper risk management before venturing in.
“New traders/investors who want to venture into cryptocurrency today need to understand what cryptocurrency and the technology behind it is all about.
“Some of the problems facing cryptocurrencies today are; cyber theft, high volatility, as well as a lack of clear regulation/government interference. New traders need to be less greedy and knowledgeable about the use of various technical analysis tools.
Lastly, every new trader needs to invest only what they can afford to lose as there is no guarantee of minimum profitability or break-even on investments.
“Trading in cryptos has a high volatility rate and not perfect for traders because it generates high levels of uncertainty, coupled with the bias that it gives crypto traders less time to react.”
Ekene Ojieh, Head of Public Relations and Corporate Strategy at Buffalo Chase, a Crypto analytic firm, in a note to Nairametrics, spoke on some key dangers associated with trading crypto. She said, “Current market data are the most reliable sources of making smart trading decisions and identifying market trends.”
Tony Emeka, CEO, CryptoTvplus, in a phone chat interview with Nairametrics, spoke on a prevailing risk associated with trading cryptos,
Another risk is market manipulation. With the small size of some cryptocurrencies, traders with large trading capital could influence the market to gain undue advantage, crypto exchanges are also suspected of market manipulations.
“The unregulated crypto market is also is a risk factor. Traders are not protected like traditional markets. I’ll add that despite the risks, crypto trading is highly rewarding, but traders should be careful.”
It’s important to understand that trading in crypto, in spite of its impressive returns over the years, comes with underlying risks. That said, it’s important for an inexperienced trader or investor to invest only the amounts he or she is willing to lose.
This article is sourced from:https://nairametrics.com