Crypto trading – what to watch out for ?

Crypto trading – what to watch out for ? Discover the pitfalls to avoid if you want to trade Bitcoin and cryptos in general.

Crypto trading – what to watch out for ? People are talking more and more about cryptocurrencies and bitcoin, and the profits can be considerable. However, there are many dangers to be aware of, what are they?

Trading crypto-currencies can be lucrative, but it also carries significant risks. Here are a few things to be wary of when engaging in crypto trading.

Bertrand and Patrick discuss crypto-currency trading:

The two of them have been friends for a long time and are sitting in a café talking.

Bertrand: Hi Patrick, how are you?

Patrick: Hi Bertrand, I’m fine, thanks. I’ve heard that you’ve started trading crypto-currencies. Is that true?

Bertrand: Yes, indeed. It’s become my main professional activity recently.

Patrick: Really? That’s really interesting. How did you get started?

Bertrand: Well, it started with an interest in blockchain technology. I did some research, read a lot and decided to invest some money in different crypto-currencies a few years ago. Over time, I learned how to analyse the markets and trade these assets.

Patrick: Is it really profitable? I mean, it must be risky too, right?

Bertrand: Absolutely, it can be very profitable, but yes, it is risky. Crypto-currency prices can change very unpredictably. That’s why it’s important to do thorough research, understand the risks and adopt a risk management strategy.

Patrick: Do you have any advice for someone who wants to get started?

Bertrand: Yes, the first thing to do is not to invest more than you can afford to lose. Then, learn as much as you can about the different crypto-currencies, blockchain technology, and start small. It’s crucial to diversify your portfolio to reduce risk.

Patrick: And what platforms do you use to trade?

Bertrand: I mainly use a decentralised trading platform, so that I remain in control of my money. Security is paramount, which is why I pay close attention to the reputation and security measures put in place by platforms.

Patrick: And have you had any difficult moments or major losses?

Bertrand: Of course, there have been periods of intense volatility when I’ve suffered losses. That’s a fact of life in the market. But I try to stay disciplined, not let my emotions control my decisions and always follow my strategy.

Patrick: Thank you for all that information, Bertrand. It sounds like a complex but fascinating world.

Bertrand: Absolutely, it’s a rapidly evolving field. You have to be attentive and ready to adapt to change.

To find out more, read the article below.

Crypto trading – what to watch out for ?

Extreme volatility:

Crypto-currency prices can fluctuate dramatically in a very short period of time. This volatility can lead to quick gains, but also significant losses.

Security of exchange platforms:

Crypto-currency exchange platforms can be vulnerable to hacking and security breaches. It is crucial to choose reputable platforms and take security measures such as using two-factor authentication and securely storing private keys.

Scams and fraud:

The crypto-currency ecosystem is unfortunately prone to numerous scams, including fraudulent ICOs (Initial Coin Offering), bogus crypto-currency projects, phishing scams, etc. It is essential to be vigilant and thoroughly check the legitimacy of any project or investment.

Lack of regulation:

The crypto-currency market is less regulated than traditional financial markets. This means there is an increased risk of market manipulation, false or misleading information and unscrupulous trading practices.

Lack of regulation:

The crypto-currency market is less regulated than traditional financial markets. This means there is an increased risk of market manipulation, false or misleading information and unscrupulous trading practices.

Speculation and financial bubbles:

Some crypto assets can be subject to speculative bubbles, where prices are artificially inflated before collapsing. It is important not to get carried away by mass movements and to make investments based on thorough analysis.

Technological risks:

Crypto-currencies are based on emerging technologies such as blockchain, which can present technical challenges and security risks. Code errors, forks, or other technical problems can impact asset values.

Leverage and financial risk:

Margin or leveraged trading is common in crypto-currencies. This can amplify gains, but also losses. It’s important to understand the mechanics of leverage and not to risk more than you can afford to lose.

A lucrative activity that deserves good preparation, here’s what we can say about it:

It’s crucial to exercise caution, do thorough research, diversify your portfolio and only invest funds you can afford to lose. It may also be wise to consult financial advisers or crypto-currency experts before making any investment decisions.

The aim is to be well prepared, with examples based on facts:

Extreme volatility:

Example: In 2017, the price of Bitcoin reached almost $20,000 in December, only to drop sharply to around $3,000 in December 2018. This volatility generated both huge profits for some investors and considerable losses for others.

Security of exchange platforms:

Example: In 2014, the exchange platform Mt. Gox, then one of the largest, went bankrupt after being hacked and losing hundreds of thousands of bitcoins belonging to its users.

Scams and fraud:

Example: several ICOs (Initial Coin Offerings) have been scams where founders have raised funds for non-existent or fraudulent projects, such as the Bitconnect ICO case which was ultimately deemed to be a pyramid scam.

Lack of regulation:

Example: Crypto-currency markets are less regulated than traditional financial markets, which can lead to market manipulation and deceptive practices, such as Pump and Dump where investors artificially inflate the price of a crypto-currency before selling massively for profit.

Speculation and financial bubbles:

Example: The craze for certain crypto-currencies, such as promising altcoins with no real use, has sometimes led to speculative bubbles where prices rose rapidly before collapsing just as quickly.

Technological risks:

Example: blockchain forks can split a crypto-currency community and lead to the creation of new crypto-currencies. For example, Bitcoin Cash was born out of a fork of the Bitcoin blockchain due to disagreements over how to scale the blockchain.

Leverage and financial risk:

Example: Margin trading, by allowing investors to borrow funds to invest more than they own, can lead to significant losses if the market moves unfavourably. Traders can be liquidated quickly if their positions are highly exposed to volatility.

To conclude:

These examples highlight some of the specific risks associated with crypto-currency trading. They underline the importance of investors understanding these risks and making informed and prudent investment decisions.

The security of your money is paramount, and some platforms may not let you get your money back easily, unfortunately there are many examples of this. That’s why we recommend decentralised trading, choosing your platform carefully to ensure that your trades run smoothly, but at least you’ll always be in control of your money because the decentralised platform doesn’t keep it.