Home Finance Top 5 Risks All Cryptocurrency Traders Are Facing in 2021

Top 5 Risks All Cryptocurrency Traders Are Facing in 2021

by Cristina Alexander

For well over a decade now, cryptocurrencies have had a huge presence in the collective consciousness of people. By now, chances are that you know more than just the basics of virtual currencies, how they operate, what they are, and what they are used for. Back in the day when they were still a novelty item in the world, only those closest to the IT and finance sectors could claim they know enough to make use of it and profit. Nowadays, anyone willing and brave enough to make a decisive step and invest some of their money can back up crypto or two and become a trader.

Still, there are many challenges and risks involved when it comes to trading cryptocurrency as a full-time job. Even as a side hustle and a hobby it can cause numerous problems for the investors and enthusiasts if they are not careful or lucky enough. Because many of the same issues related to the cryptos persist, it is very difficult to convince the masses that they are the future. A lot needs to happen before average people who know little about modern tech and the changes in the economy jump on and start investing. For those among you who are willing to finally invest in cryptos and become traders in 2021, there are certain risks to think about.

Worry not though as in this article we will talk more about them. As a matter of fact, right here and now we are discussing the biggest risks that all cryptocurrency traders face in 2021. Both the newcomers and the long-time traders share certain risks that are present across the industry. In order to be better than the competition, you have to know about them before you can counter or overcome them. Read on to find out more about this and be sure to check out trustpedia.io for additional information of crypto trading and the latest news about it.

1. Cryptocurrencies are Very Volatile

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The original problem that has been preventing more people from investing in digital currencies is their volatile nature. Most, if not all of them share this trait. They can literally grow tenfold or plunge in value overnight, rendering you either rich for a short period or completely broke. These sudden, rapid, and unpredictable changes are the stuff of nightmares for traders because you often do not even get a chance to react. Unless you are actively doing work when a huge rise or drop happens, you will not be able to react. The window for selling high and buying low is only available for a short while before the currency starts to change more or stabilize. Dropping by thousands of dollars is much more frequent than rising. Once the main crypto like Bitcoin starts rising, others usually follow suit, and the market changes. With drops, things are much less clear and it does not have to make sense.

2. No Regulations

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This is both a positive and a negative side to cryptos. There is nobody in charge of them like the government or a central bank. This is therefore one of the biggest differences between regular money (fiat currencies) and cryptos. However, due to the lack of laws and regulations, there are many grey areas and potentially dangerous or malicious activity in the network. You are never 100% sure whether or not things will go well especially because the anonymity is high and all you have is the electronic wallet address of the other person. The lack of at least some regulations also prevents more people from hopping on board.

3. Geographical Limitations

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Depending on where you live and work, you could be severely limited in terms of geography and availability of both access to cryptos and the infrastructure that is there to allow you to trade. Certain regions and countries have special laws and even bans on cryptos and prevent their citizens from doing any kind of investing or trading. Living in these countries and territories means that you will not be able to do crypto trading that easily. Even if find partners and manage to get some tokens in your portfolio, you will again be limited with what you can do with it. Sadly, there is not enough equality in the world when it comes to economy and technology, and certain beliefs and ideologies prevent a huge number of people from prospering.

4. Scams

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Now more than ever there is an abundance of carefully planned and designed scams that people fall for. Scammers attract the victims by promising huge returns on new coins they are planning to launch and ask for donations and investments. Once they get enough money, usually a few million dollars, they bail and steal the entire funding. What prevents anyone form getting them are the misguiding terms and conditions people fail to read. Other types of scams also exist, just like with anything else on the internet. It takes a great deal of research and care not to fall for them. Stick with the leading crypto exchanges if you want to remain safe and know that you should never give away information about your wallet to anyone but the people you know you can trade with.

5. Meme Coins

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Memes have been present a bit longer than cryptocurrency. They are the leading source of internet humor of every kind. Unless you are living under the rock, you come across dozens of them each day. As soon as you log into Facebook, Instagram, or anywhere else, you can see a meme photo, meme video, or a meme gif. It is a cultural phenomenon like no other, one that has lasted for almost 15 years already. They are so popular that meme cryptos are now a thing. The biggest example was Dogecoin, a take on the popular Doge meme that features a silly looking Shiba Inu. At one point, Dogecoin was worth more than Ford and other huge US companies. All it took was Elon Musk tweeting about it. Now, it is a trend to start cryptos as a joke and hope for the best while pumping and hyping their name, use, and value. People fall for it and lose money once they inevitably drop in value and importance.