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A sober look: risk analysis of cryptocurrency

Vladlena Martus 2022-08-08

A sober look: risk analysis of cryptocurrency

Cryptocurrency is a very popular asset among both professional traders and beginners. Most of them are led by promises of quick profits, but easy crypto trading is just a myth. More than 23 million people trade cryptocurrencies in the US and more than 15 million in India. Imagine how many people are exposed to the risks of cryptocurrency trading daily?!

Cryptocurrency trading can end up with huge risks and countless account losses if you do not know the theory, have experience or learn how cryptocurrencies generally work.

We suggest looking at the “other side of the moon” and the risks you may face if you decide to get involved in cryptocurrency. A professional and hasty trader is always a forewarned one; who knows how to deal with this or that problem.

Remember that the risks associated with cryptocurrencies could be huge. Be careful and vigilant when trading cryptocurrencies, trust solid brokers and platforms, be on the lookout, and do not do questionable actions with your savings. 

Wisebitcoin hopes you’ll avoid these risks or always be ready for them!

High volatility 

The sudden shifts in the market sentiment that results in significant price movements – volatility – is one of the most critical risks of cryptocurrency trading. Simultaneously, it is also the reason the market drives. 

Of course, volatility is not only related to crypto. Many financial instruments are regularly affected by this. However, the more intense and widespread effect they cause specifically on the crypto market. 

How to minimize this risk: Try to trade only instruments you can afford and are ready to lose. If you have your last money for apartment rent, forget about investing in crypto or trading with it. Prepare better and be ready for a more affordable amount. 


No regulations

This issue is still unclear. In some countries, crypto is regulated and made as an official payment method. In others – governments still doubt the presence of cryptocurrencies in everyday life. 

There are huge concerns about criminals and terrorists using BTC and other cryptocurrencies for their dirty work. On the other hand – cryptocurrency is a marker and product of the high-tech. We can’t just ignore the fact that many people nowadays use it as a secure and concrete money transfer or earning method. 

How to minimize this risk: There is no other way than just to wait until the cryptocurrency gets its accurate regulation. However, nobody promises that it will make our life much easier. 


Lack of diversification in your portfolio

It would be best if you always remembered not to get hung up by only assets or instruments. If one crypto coin is rocketing, it doesn’t mean it will last forever. One day it may drop, and you will lose considerable money. 

How to minimize this risk: Diversification, diversification, and diversification of your portfolio! It is the helpful key to keeping you away from significant losses and staying calm if one coin drops because the other one could rise simultaneously. 


Exchange and other cyber hacks

Security is quite quality nowadays. However, some cases prove you should always be aware of hacks and cyber robberies. Thus, Mt. Gox was hacked in 2014 and lost around $460 million worth of Bitcoin. We wrote about it here and the other significant stages of BTC evolution. 

How to minimize this risk: Research the reliability of a particular exchange you want to work with, its security tips and tools, reputation, and feedback and reviews. Enable the 2FA for more protection and install up-to-date anti-hacking software on your device. In addition, keep on the exchange money you plan to trade with there. 


Private key loss

If you lose the only way to access your account, your assets may be at risk. In most cases, there is no way to solve this issue, so it is necessary to take precautions. 

How to minimize this risk: Try to create backup copies of the private key before any issues and keep them safe somewhere nobody can get them. 


As before, we looked through the main risks with crypto you may face regularly. Wisebitcoin wants to share additional risk management tips and prevent all related troubles. Of course, it is impossible to trade without risk. However, we can try to minimize them as much as we can. 


Decide what your strategies are 

The entry and exit point in your trade decide everything. Please stick to your chosen strategy, and don’t try to do experiments (unless it is a demo account). 

Avoid unnecessary leverage

In most cases, traders use leverage to increase their order size and go long or short. However, you may be left with the loss of your investment and leverage together. Be attentive and control your greed. 

Trading quality should be over quantity

It is classic. If you want successful trading, be ready to sacrifice quantity but get the necessary experience with the amount. In addition, not every market condition will be suitable for your strategies.


To sum up

To sum up, we believe this article will help you be ready for every kind of issue related to the cryptocurrency market, not panic, and feel sure of yourself for every move.

Wisebitcoin, by the way, offers many helpful and essential tools for intelligent and secure cryptocurrency trading. It provides the following: 

  • Liquidity up to 100X leverage to crypto exchanges and traders;
  • User-friendly platform; 
  • Security and safety of your account; 
  • Interface suitable for novice and professionals; 
  • Multi-language support for the global community; 
  • Exchange partners with innovative names in the blockchain industry;
  • Combined knowledge and experience for rapidly accumulating in the market; 
  • Over 50 cryptocurrencies for the spot trading exchange;
  • Wisebitcoin cloud exchange that lets trading with the global community; 
  • Actual news related to the cryptocurrency market and articles on the current topics.

Wisebitcoin is your up-to-date comrade in cryptocurrency trading. We are glad to offer our traders one of the best services on the market. You can check out our website and then go to the exchange platform to see how it works with your own eyes. 

We not only provide our traders with a reliable platform for secure trading but also talk about important events in the world of cryptocurrencies. Thus, for example, we recently published a text about the opening of Bitcoin Academy. Jay-Z and Jack Dorsey prepared an enjoyable, informational occasion to talk about!

Follow the Wisebitcoin website for more details, and be ready for every risk you may face when trading with cryptocurrency!