4 Ugly Truths You Must Know Before Joining Cryptocurrency Trading
Cryptocurrency is slowly gaining popularity in the world. When trading with cryptocurrency, you exchange your real money like Euros for a crypto coin or token. These unduplicable coins are unique code lines that are traceable.
There are various cryptocurrency platforms where you can transact without government or banks’ control, like Bitcoin, Litecoin, Ether, and Ripple. The most common type of cryptocurrency that has taken the world by storm is bitcoin. The Ether is also gaining popularity and comes a close second.
The uncertainty of cryptocurrency can sometimes cost you your investment. But with proper risk calculation and understanding, you can reap the rewards from these tokens.
These risks include the following:
1. Cryptocurrencies are Unstable
The value of cryptocurrency can swing from $20,000 to $900 in a matter of seconds. This volatility is uncontrollable because there is no over-arching authority during cryptocurrency trades. Therefore, you must be an ardent follower to analyze the trends to identify the best time to trade and benefit from these tokens.
As a rule of thumb, if you cannot sustain yourself for six consecutive months without relying on your investment, you are not ready to do it. Do not take unnecessary risks that could jeopardize your financial future.
2. Lack of Extensive Knowledge
Cryptocurrency trading is shrouded in mystery, and there is only a handful of people who understand how it works. There are a lot of webinars, YouTube videos, and documentation about bitcoin but not so much about other cryptocurrencies like Ether or Ripple. As a result, the Ethereum trade volume is significantly lower than the bitcoin trades.
Ultimately, crypto trading is not a reliable investment. Investments banks have simplified it for you; if you cannot explain your investment to a 10-year-old, it is pointless. You cannot invest in an under-researched field; you are setting yourself up for failure.
3. Cryptocurrency Trading Attracts Fraudsters
In the modern world, fraud and other most illegal transactions are via crypto. It is easy for someone to con you over these digital transactions since there are no stipulated rules or governance. The advancement in technology has made it more challenging to distinguish honest from dishonest people.
However, not all cryptocurrency traders are criminals, but the incidence of arms deal transactions via Bitcoin is insurmountable. Do your due diligence before involving a financial manager in your cryptocurrency deals.
4. Cryptocurrency is Gambling
Crypto trading, unlike other investments, has unproven rates of profitable returns. The volatility of this market has a lot to do with the increased chances of losing money. If you invest $1000 and the value of a cryptocurrency like Bitcoin falls to $900, your investment loses all its utility.
To some extent, cryptocurrency is a get-rich-quick scheme; it seems effortless and appealing, but is it a big gamble. The chances of losing investments are almost triple that of stock mutual funds. There is no pattern for predicting potential outcomes; you can only speculate on the upcoming trends.
Final Thoughts
There are chances that soon, with increased security and assurance, cryptocurrency will overtake real currency, but until then, do not channel all your investment hopes towards crypto trading. Big brands like Facebook have created their cryptocurrency called Libra; the crypto business’s future seems promising. However, currently, trust in the industry is non-existent.
