Risks of Cryptocurrency Trading
Is it risky to invest or speculate on cryptocurrencies? Are some cryptocurrencies more risky than others? Let’s try to list here all the risks incurred by cryptocurrency traders.
Risk 1: Cryptocurrencies are intangible
Buying cryptocurrencies is buying a blockchain’s support currency or investing in a project. Currency purchases are intangible... Some even say that they are nothing but “hot air”. If the blockchain is destroyed, or if the project is never finished, the cryptocurrency is worth absolutely nothing on the market.
Risk 2: Cryptocurrencies operate in a decentralized market.
Decentralised' means no supervisory authority. And there is a reason that a large number of SCAMS pop up on cryptocurrencies. Bogus fundraising without the slightest supporting project. In a cryptocurrency’s "white paper", the creators of the cryptocurrency can put in what they want, lie, invent projects that are impossible but that will attract investors. In the event of a bogus project, investors therefore have no authority to turn to for filing a complaint. The cryptocurrency’s quotation remains open, but it will inevitably end up at zero.
Risk 3: creators who run off with the cash... of the ICO...
Beyond SCAMS (fake or rotten projects), some companies raise funds (ICO on cryptocurrencies) then take the money and run. Never giving the investors the much-fated ICO’s cryptocurrency. These are real scams! But there are so many, that some investors fall into the trap. And once again, there is no control authority to turn to. So consider your investment as lost if, by misfortune, you fall for them.
Risk 4: transfer errors
Errors are easily made. Transfer to an incorrect wallet address, transfer to a different cryptocurrency wallet, and wham! all those funds are lost. Be careful before you touch your cryptocurrency wallets.
Also read: Ethereum (ETH) Transfer Problem
Risk5: cryptocurrency volatility
Cryptocurrency markets are very volatile. It is not uncommon to see cryptocurrencies double or triple in less than an hour; but it is also not uncommon to see cryptocurrencies drop by 90% in less than an hour. Volatility is a risk; we must be aware of it.
Risk 6: cryptocurrency storage
You are highly recommended not to leave cryptocurrencies on the exchange platform that allowed you to buy them; Why? Because these establishments also lack regulation. It would not be surprising to see establishments close down quickly, taking away all the cryptocurrencies the customers have bought.
Holding cryptocurrencies on a private wallet is recommended. But not all cryptocurrencies offer a private wallet. Investors then have two possibilities: leave the cryptocurrencies on the trading platform, or move them to special wallet platforms. In my opinion, the risk remains the same.
Finally, holding cryptocurrencies on private wallets, or on a NANO S key (for example) remains risky. A private key can be stolen, a NANO S key can be lost. Therefore, keep your cryptocurrency wallet safer than in a "safe".
Risk 67: liquidity problem
See article : Liquidity problem with cryptocurrency trading