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Three Risks That Make Crypto Investors Lose Money on Cryptocurrency Trading

Nicholas Otieno

Posted on August 21, 2019 14:16

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Cryptocurrency trading is a great business opportunity that people need to embrace. Many people rush to make money in the digital currency market but have little knowledge of the underlying risks awaiting whatever they have invested during market booms and bursts. With this concern in mind, I’ve compiled three significant risks which potential investors should be aware of while casting their nets in the crypto market.

Cryptocurrency is not a sure game you can rely on to gain profit. I’ve come across sad stories about people investing but end up losing their hard-earned money on crypto trading.

To make the matter worse, the majority of the victimized investors don’t talk about the issue. However, I’m encouraged to see some bold individuals come forward and narrate how they went into the game and describe their experience.

Based on their narratives, I’ve managed to identify the potential risks.

Here are the three risks that make investors vulnerable to lose money on crypto trading.

Market Risks

Low liquidity, extreme price volatility, or a bubble (artificially inflated prices) are market risks which commonly develop in the market. Such risks are unpredictable, and their occurrence limits an investor’s capacity to redeem his or her investment.

For example, Pete Roberts invested $23,000 into cryptocurrency when the booming prices attracted investors into the market to try their luck. But eight months later, his investment worth about $4,000, a loss that left him financially drained.

The same thing happened to Peter McCormack who made $1 million on bitcoin but lost everything when the bubble burst.

Many investors have lost money because of such unforeseen market risks that end up sweeping out whatever gains they received from investing. I’ve witnessed many investors make profits during the booms, but then lose horribly when the market bursts and leaves them with nothing.

Perhaps their mistake is forgetting to withdraw their profit from the pool, hoping to accumulate more.  

Operational Risks

Several investors lose money due to fraud and trading manipulations on unreliable and unregulated trading platforms. These risks happen because many people are unaware that unregulated exchanges manipulate cryptocurrency data. New research finds out that unregulated exchanges fake 95% of spot bitcoin trading volume.

Thousands of crypto investors have been conned out of huge amounts of real money. Criminals use new technology and old-fashioned tactics to fake their data in schemes based on cryptocurrencies exchanged through blockchains (online databases).

Cybersecurity (Information Security) Risks

Cybersecurity risks involve theft or loss of passwords (personal keys) to digital wallets which provide access to cryptocurrencies. Cyber-attacks against unregulated digital wallets and trading platforms are a common occurrence.

For instance, Monty Munford lost £25,000 when criminals used malicious software to hack his password and stole his money. Monty acknowledged making a mistake as he stored his password on his computer. But remember, malware has the ability to scan the movement of a keystroke and discover a private key, even if you chop it into partitioned blocks and keep it in different places.

The Take-Away

My intent is not to scare people, but to make them aware of the underlying risks in the cryptocurrency trading. Otherwise, you don’t need to be a professional to trade, but you do require discipline, attention/caution, and a systematic approach to become successful in your trading.

 

Nicholas Otieno

Posted on August 21, 2019 14:16

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Source: Reuters

SEOUL (Reuters) - South Korea has yet to decide how to regulate crypotocurrency trading, a senior government official said,...

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