The dark side of the cryptocurrency trade: understanding of exchange risk

The world of cryptocurrency trade has grown exponentially in recent years, with prices that float wildly based on the feeling of the market and other factors. While some traders are convinced that the cryptocurrency market offers an unlimited rise potential, others have adopted a more cautious approach, aware of the risks involved.

What is the risk of exchange rate?

The risk of the exchange rate refers to volatility and unpredictability inherent in commercial currencies against each other. When you buy a cryptocurrency on an exchange and then sell it at a different price on another exchange or when it comes between two countries, you are exposing yourself to the fluctuations of the exchange rate.

For example, if you buy 100 USD on Bitcoin (BTC) and sell it for 120 USD, your profit margin has changed. You have earned 20% of the original amount, but now you are facing a new risk: what happens if the price of Bitcoin decreases? If the price drops to 80 USD, your initial gain is lost and you will remain a significant loss.

The case against cryptocurrency trading

While some traders swear for the potential of enormous earnings in the cryptocurrency markets, others argue that the risks far exceed any prizes. Here are only some reasons why:

• Risk of liquidity : In times of volatility of the market, it is easy to lose access to your cryptocurrencies, even if you have invested them in a reliable exchange.

• Trading costs : trading commissions can eat in your profits, in particular for smaller negotiations or those performed via third -party brokers rather than directly with exchanges such as Kraken and Bitmex.

• Risk of Eccual : the exchanges themselves are not immune to risk; Some have faced hacking accidents, market manipulation or even definitive closure in recent times.

The case for cryptocurrency trading

However, for those who have done their research and include risks, cryptocurrency trading offers a potentially profitable opportunity for expert investors. Here are only some reasons why:

• Potential for high returns : some traders claim that cryptocurrencies such as Bitcoin (BTC) can experiment with price increases up to 100% in a single day.

2

• Question request

  : As the more people enter the cryptocurrency market, the demand for some cryptocurrencies and markets increases, creating new opportunities for traders.

Kraken and Bitmex: exchanges with a reputation

Two of the larger and respectable cryptocurrency exchanges were at the forefront of the sector:

• Kraken : founded in 2013, Kraken is known for its high level of security, a robust commercial infrastructure and a large list of supported cryptocurrencies.

• Bitmex : launched in 2014, Bitmex has gained the reputation of one of the safest and most reliable exchanges, with strong technical measures to protect users from hacking attempts.

Mitigant exchange rate risk

To minimize the risk of exchange rate, operators should:

1

• Use arrest orders : Sets a price to which it will automatically sell your positions when they reach certain levels to limit potential losses.

• Monitor the feeling of the market : keep an eye on the news, events and discussions on social media that can affect currency prices.

Conclusion

While the world of cryptocurrency trade is undoubtedly volatile, for those who include and take measures to mitigate the exchange risk, it can be a rewarding investment opportunity. By doing your search, diversifying your wallet and being aware of the risks involved, it is possible to navigate with greater confidence in the complex panorama of the cryptocurrency markets.