Risks Involved in Cryptocurrency

Following that investing in cryptocurrency is lucrative and profitable, almost everyone is venturing into the business. On this note, it is important that we understand the risks involved in crypto trading, and how to manage it as well.

Risks and risk-taking are key major phases every human being encounters. It cuts across important aspects of life like education, health, careers, businesses, families, etc. It is an integral part of human life as it poses challenges and opportunities to the individuals involved.

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Risks in the financialal and business sector happen everyday because of the infinite economical activities. There are tons of risks associated with crypto trading and I will be explaining them subsequently in this post.

Why would Trading Cryptocurrencies be Risky?

High Level of Uncertainty

This could be heart-skipping for newbies into the cryptocurrency space as there will be constant fluctuations in the prices of commodities in the digital market. Uncertainty is the condition whereby we are not sure of the volatility of a coin. Volatility there means the upward and downward movement in the prices of a coin.

It is a well-known fact that good crypto projects will always do well in the long-term because of certain factors like high community strength, well-defined roadmap, and good use cases. A coin rarely fails or crashes when steady economic activities are going on by different users around the globe.

Clear-cut roadmap involves creating a meaningful blueprint or setting fine strategies that can be profitable for a particular crypto project. It also covers the interest of the customers, and ways to develop or update new projects for customers in the marketplace.

Even though cryptocurrency is still a new technology, it has been able to seize the hearts of customers with its unique features. Cryptocurrency has several use cases. For example, Hive blockchain rewards users for creating meaningful content. Another clear crypto use case is using cryptocurrencies to purchase goods and services.

Even with these analyses, the future of cryptocurrency is uncertain as it is always difficult to predict when an asset will either pump or dump.

Losses are Inevitable

Another risk is loss. There are periods in which good fortunes are made in the crypto space while most times heartbreaking losses are made.
That is why it is essential that you only invest what you can afford to lose.

Losses could occur when the price of an asset decreases due to certain unfavorable economic conditions, strict regulatory policies, and/or failure of the project forexample tthe case of Terra Luna, the algorithmic stablecoin founded by Do Kwon and the Terraform Labs. Here, Do Kwon presented a novel stablecoin idea where he created an stablecoin backed by another crypto instead a fiat currency.

Unfortunately, Kwon's idea failed as the crypto-backed stablecoin, dubbed TerraUSD with a ticker UST, de-pegged in May, losing parity with $1. As a result, investors who had their money in UST and its sister token, Luna experienced huge losses.

These and many more are the risks associated with crypto currency. Once in a while you find yourself in any of these cases, be it loss or uncertainty.
The future of money is cryptocurrency, already it has spread its tentacles across the globe. Cryptocurrency is very promising and it's worth the risks.

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