Cryptocurrencies are becoming more stable as they expand into everyday use. Investors are also generating profits from trading crypto, but these professionals are aware of the challenges in the market. Getting in and out of your positions is the method behind the profiting madness, but not understanding the risk will cost you. Let’s take a look at these top-five issues in the cryptocurrency market today.
- Criminal Funding and Price Manipulations
Price manipulation happens when large orders are placed by a few people. The ability for a single trader to change prices establishes a dangerous scenario. These investors can contact one another before making their trades. They can organize the rapid buy or sell of a coin and falsely alter public prices. Bitcoin is what sets the stage for this. The criminal minds that use this cryptocurrency also have the most coins.
- Account Hacks and Questionable Wallets
Your money, identity and personal life can be negatively influenced through your trading account. The millions of dollars that are stolen every year are accessed through online services. Opening an account to trade cryptocurrencies comes with the potential of you being hacked. You have to manage your coins by owning hot and cold wallets. Hot wallets connect your money to the web. Cold wallets, instead, keep your coins safe offline.
- Taxes: Defining the Term Security via the SEC
Your profits from the cryptocurrency market are counted as “taxable, capital gains” according to the U.S. government. The real issue is finding a coin that you can legally trade. Crypto is building a tremendous force regarding its popularity, and this includes the tendency for agencies to create investment options that the Security and Exchange Commission deems as illegal. Knowing which coins are tradable is a real challenge.
- The “IPO”: The Regulations and Licensing for Trading Platforms
The “initial coin offering” is a publicity model that was inspired by the classical “initial public offering.” There’s a real challenge behind the introduction of new coins in the market. Even though these tokens can earn themselves a legal status, not all of them are real or provide actual utility. Keep in mind the dangers behind trading new currencies. Many developers promote false coins just to rob honest people.
- Deadly Volatility for Market Participants
The last major risk deals with your own emotional outlook. There’s no market as emotionally wired as is a volatile one. Volatility is a result of manipulation or high volumes of traders entering the market simultaneously. What then looks like a profitable condition turns against you, and in drastic ways, you can lose all of your money.