Cryptocurrency market is profitable, but it is risky too. It is rightly said that “no risk no gain.” You can earn great profit from crypto bazaar provided you know the risk related to this financial marketplace. Once you see the risk of this marketplace, you can plan your investment strategy accordingly.
If we closely view the crypto bazar, we can easily find that badly fluctuating prices, lack of customer safety and plenty of scams around create a fix for the crypto investor. Knowing about the market risk is the only way to stay safe in this domain.
However, every problem has its solution, so is about the risk of investing in the crypto market. Homework and understanding the risks is the best way to be aware and guarded against market risk. Here we have discussed in outline details the top threats in the crypto market.
Market is Volatile
Volatility is one of the prime risks of the crypto market. You can check the market, and you will be readily aware that the price suddenly goes ups and without any intimation falls down. No doubt that the sudden upward movement of crypto token price can bring good profit for you, but a sudden fall in price may cost your steep loss.
There is no formula for investing in the crypto market; however, you should never invest beyond your tolerance limit. If you incur a loss on a limited fund, you should be able to afford to lose perhaps.
Fiat currency investment is a secured investment to a large extent. These investments are centrally monitored by federal authority. It is possible to assess and predict these investments.
But the crypto market is a decentralized one and cannot be monitored in a simple way. There is no consumer protection in this market, hence investing becomes more tricky and risky.
Understanding the market trend and following the specific crypto network an investor can assess the potential of a crypto token: accordingly, he can take the risk of investing in that cryptocurrency. However, the crypto investment is never backed by any consumer protection arrangement, and it is a risk indeed.
All that glitters are not gold. This proverb perfectly is applicable for crypto tokens. Presently there are at least 2000 types of crypto tokens in the market, and not all the token are doing well. Longevity is one of the dicey factors that an investor need to think about before making an investment.
None of the crypto coins are monitored by federal authority. Only you can get the information about the enlistment of these coins from DEX (Decentralized exchanges) and follow these coins and related network for understanding their market acceptance, etc.
However, longevity is one of the risks of investing in the crypto market. Before investing in the crypto market, you must check the credibility of a crypto coin.
Crypto market has shown a meteoric rise recently, and this global market is running worldwide without any fiscal regulation. It is decentralized in its nature, and that is why taxation status, outright legality, trading rules cannot be made fixed. These legal discrepancies are some of the most critical issues an investor has to count on.
Unless speculation about these points is sorted out, investing in the crypto market on a specific crypto coin will remain extremely risky.
Scams are one of the worst threats of this market. As crypto networks are decentralized and work on the peer-to-peer network, it is complicated to differentiate crypto scams at one go. If you invest money in a crypto scam or fake /unreliable coin, there is a high chance that your investment will go in vain.
The two most common scams of the crypto market are false ICOs and Twitter bots.
ICOs are the crypto form of share market IPOs. Just similar to IPO, ICOs need substantial meticulousness from a to-be investor. However, very few investors manage to acquire robust crypto market research. Scammers create hype about the fake IPOs, but once you transfer the payment, you will never get to hear from that ICO admin again.
Twitter bots are configured similar to an official account. They typically assure an investor to pay a fixed quantity of coin in exchange of a minor deposit in quick TAT. Investors should avoid these fast profit scams immediately to stay away from their huge loss.
Human error in the crypto market can turn to be fatal for the investment. Unless the investors acquire strong knowledge about the market and related investment as well as about crypto selling in the market, there can be errors, and that error can spoil the prospect of the investment in this market.
Investing in a crypto market is not a tough job, but you need to learn the ups and downs of the market to avoid the complexity and misunderstanding.
Manipulation of Market
Market manipulation is one of the common vices that often create a problem for the crypto investors, especially for the beginners. There are many instances where big players in the market create hype and that results in manipulation. There are many instances of pump and dump strategy of crypto giants that create sudden ups and downs in the related market.
Other than pump and dump strategy, sell wall, and dark pool practices are other well-known manipulation practices. In sell wall, investors start accumulating crypto coins economically ahead of positive news, and dark pool strategy covers unidentified trading, which will remain hidden from centralized exchanges’ eyes.
Besides, irregular character of cryptocurrency is another reason for creating confusion in the market. Leaving giant players aside, beginner investors mostly find understanding this crypto market quite difficult. Investment in the crypto market without understanding the trend can be extremely risky for investors.
Other problems with cryptocurrency
- Storing cryptocurrency in the wallet will not offer you any benefits.
- The price of cryptocurrency may rise and fall at random.
- Investment return is completely unpredictable.
These are some of the most pertinent risk factors of the crypto market. An investor has to understand all these risk factors thoroughly so that the investment strategy of an investor in the crypto market becomes full-proof.
Only homework or research cannot help an investor to understand all the nitty-gritty of the crypto market. Following the crypto, influencers is another way to understand the bazaar. If you are an investor and want to have profits in the crypto market, counting on the risk as mentioned above factors will help you to play mostly safe.
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