Crypto Currency

What are the risks associated with cryptocurrency trading?

What Is Cryptocurrency Trading?

Cryptocurrency traders are those who make financial decisions about how cryptocurrencies are going against either the dollar (in crypto/dollar pairs) or another cryptocurrency (in crypto-to-crypto pairs). Among the most popular trading methods for cryptocurrencies are CFDs (contracts for difference), since they allow for greater flexibility and leverage, and they allow traders to take both short and long positions simultaneously.

The risks that you need to be aware of when trading cryptocurrencies are mainly related to its volatility. These are high-risk and speculative investments, and it is important to be aware of the risks before you begin trading.

They are susceptible to error and hacking: Technical glitches, human error, and hacking cannot be prevented completely.

They are unregulated: Currently, cryptocurrencies are unregulated by governments and central banks, but they are beginning to gain attention. For example, some are questioning whether they should be classified as commodities or virtual currencies.

They are volatile: As a result of unexpected changes in market sentiment, it is not uncommon for cryptocurrency values to suddenly drop by hundreds, if not thousands of dollars in a matter of seconds. It is not uncommon for the price of cryptocurrencies to fall by steep and sudden percentages.

They can be affected by forks or discontinuation: Before trading cryptocurrency, you should become familiar with the risks associated with hard forks or discontinuations. It is possible that there will be significant price volatility around a hard fork, and we may suspend trading if we do not have reliable prices from the underlying market during the event and you also need a Cash App.

Although we aim to notify you of potential blockchain forks, it is ultimately your responsibility to find out when they might occur.

Risks of cryptocurrency spread bets and CFDs

BBTC Bitcoin Trading Platform offers spread betting accounts and CFD accounts through which you have the ability to trade bitcoin, ethereum, and other cryptocurrencies. This means you are exposed to slightly different risks than when you would buy them outright through a traditional broker. 

They can be affected by gapping: Prices can move from one level to another without actually passing through the level in between when market volatility occurs. When market volatility is high, gapping (or slippage) can occur. As a result, your stop-loss could be executed at a level below what you requested. This can worsen losses.

They are high-risk speculative products: The spread betting and CFD trading methods require only a small deposit to open a position. The volatility of cryptocurrencies, combined with trading on margin, could result in significant losses. Profits and losses are based on the full value of the trade.

Pricing variations: In contrast to currencies, the price of cryptocurrencies can vary significantly depending on the spread bet or CFD.

Charges may be greater than with other asset classes: Considering the likelihood of making a profit versus the impact of these fees should be considered before trading spread betting or CFD cryptocurrencies.

Investing in cryptocurrency may not be suitable for everyone, so it is best to make sure you are an experienced investor who has a sophisticated understanding of the financial markets before you begin. Crypto Futures Trading may not be appropriate for everyone. Before you decide whether to start trading spread betting or CFDs, we recommend that you seek independent professional advice, if necessary.

In order to offer cryptocurrency spread bets and CFDs, firms must be authorised and supervised by the FCA, which regulates spread betting and CFDs. The Financial Ombudsman Service (FOS) can handle individual complaints, while the Financial Services Compensation Scheme (FSCS) will handle eligible consumer complaints. However, any trade losses will not be covered by these protections.

James Morkel

Tech website author with a passion for all things technology. Expert in various tech domains, including software, gadgets, artificial intelligence, and emerging technologies. Dedicated to simplifying complex topics and providing informative and engaging content to readers. Stay updated with the latest tech trends and industry news through their insightful articles.

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