Why Crypto Trading is Risky?

You may already be familiar with the term crypto trading, which in recent years has been busy among traders. Crypto trading actually has almost the same meaning as stock trading, except that the difference is in the object of transaction in the form of cryptocurrency.

What is crypto?

In general, crypto is a virtual currency whose security is guaranteed by cryptography. Cryptography makes it impossible for cryptocurrencies to be counterfeited or double-spent. So, even though it is used virtually, there is no chance of counterfeiting to the detriment of the owner.

Why have cryptocurrencies become popular in recent times? The reason is because these digital assets are not bound by a central authority, such as a bank. By using the decentralised network of Blockchain technology, the distribution system can be through various computers.

Basically, cryptocurrency is present because of the blockchain and digital currency market among the public. In fact, there are several types of cryptocurrencies that are very famous and their value can reach a nominal value of tens to hundreds of millions of rupiah.

Definition of Crypto Trading

What exactly is crypto trading? According to the Ministry of Trade’s Commodity Futures Trading Supervisory Agency (Bappebti), crypto or crypto assets are commodities that can be traded on futures exchanges. Although Bank Indonesia prohibits crypto assets from being used as currency or means of payment, crypto assets can generally be used as investment tools and can be traded.

These crypto assets are often referred to as crypto coins or crypto money in crypto trading which can usually be traded all day without holidays or 24 hours per 7 days. However, there are many things you need to consider before starting crypto trading because this activity has a very high risk.

In this case, crypto trading is the activity of selling and buying digital currency assets available in the cryptocurrency market with the aim of making a profit. Cryptocurrency itself is currently considered as an asset.

Crypto Trading Risks

As mentioned, crypto trading comes with a high risk, so it is important to be careful before engaging in this activity. To prevent the occurrence of losses of considerable value in crypto trading, you need to pay attention to some of the risks and disadvantages of this trade, including:

Risk of infinite decline in value

In crypto trading, the value of the currency can increase by hundreds of per cent without any limit. This is certainly tantalising enough for those of you who want to profit from crypto trading. However, there is an unlimited downside risk when it comes to crypto trading.

In this case, it is possible that you as a trader or investor who has profited in crypto trading can actually turn around to lose a very large value due to the fluctuating buying and selling of crypto assets. This is clearly different from investing in capital markets, such as mutual funds or stocks.

Those are some of the risks of crypto trading that you need to know carefully. The reason is, currently there are many victims with huge losses due to doing this trading activity without much knowledge. Therefore, you should be more careful about trading.

In addition to trading, there are many types of investments that you can make, one of which is mutual funds. But what’s the difference between trading and investing? Check out the full explanation below.

Difference between Trading and Investment

To understand the difference between trading and investing, you first need to know the purpose of each of these activities. Investing is orientated towards creating profits over a relatively long period of time by buying and holding assets. Trading, on the other hand, aims to generate profits through buying and selling stocks.

If there are daily market fluctuations or ups and downs, it will not affect investors because they usually aim for long-term investments. Traders, on the other hand, tend to be able to profit from these daily market fluctuations by buying and selling the stocks they own.

In addition, you can also see the difference between investing and trading in terms of additional benefits. Usually, investors who invest can enjoy various facilities, such as dividends, bonuses, stock splits, and so on.

The difference between trading and investing can also be seen in terms of timeframe. Generally, investments can be made with a long period of time. Trading, on the other hand, is usually done over a short period of time.

That’s why strategic investors generally create wealth with dividends and compound interest, while traders depend on market timing, so they must be observant to find the right time to trade stocks.

However, both trading and investing come with their own risks. Most importantly, you need to be more careful to reduce or even prevent the risks that may occur.

Leave a Reply

Your email address will not be published. Required fields are marked *