Cryptocurrencies like BitCoin, Ripple and Monero has had a torrid time over the last few months with their monetary value reaching incredible highs and lows. In this volatile market scenario, getting into the cryptocurrency market currently poses a few major deterrents.
If we had to single out one major factor that has been stopping most people from entering into the cryptocurrency trading, then we would probably pin it on market volatility. Yet, it is this same volatile and unpredictable nature of the market that makes cryptocurrencies so lucrative a trade asset for buyers and day traders alike.
So is there any way to minimise the risks and maximise profits? Well, before we can answer that question, let us first take an indepth look at the inherent risks of trading cryptocurrencies in the present scenario!
The Major Risks Associated With Trading in Cryptocurrencies
While there are a laundry list of things that can go wrong while operating trades with cryptocurrencies, let’s break them down to the major ones for the sake of brevity.
- Market Risks:
Even the best Cryptocurrency trader can’t accurately predict every peak and trough of a particular coin. Having said that, it is nearly impossible for someone to do that even in the traditional share market. What magnifies the risk for cryptocurrencies is the fact that coins like Bitcoin and Ripple can have a zenit and nadir that differ by thousands of dollars all in the course of a single day.
- Wallets Being Hacked:
With the rising popularity of cryptocurrencies, several exchanges have cropped up in order to meet the demands of newer entrants into the cryptocurrency scene who are eager to make a quick buck trading various coins. However, most of these exchanges neglect to treat their securities as the highest priority as a result of which there has been a series of hacks that have led to customers losing all the cryptocurrencies they had managed to stow away in their wallets.
- Lack of Capital:
Since the boom of cryptocurrencies, the major players that have come into the public eye have meteorically shot up in value. This means that if you are looking to trade established cryptos like Bitcoin and Ripple, there is an immense amount of initial investment that you’d have to put in.
So what is the solution? While trading in coins in the sub dollar value may sound lucrative, they still need a fair amount of expenditure to get to a point where there are any real profit margins. And even the, there are the associated risks of getting your personal wallet targeted by hackers.
Trading Cryptos via CFD: A Game Changer
For something to be truly revolutionary, it needs to fix a problem, but for something to be a game changer, it needs to be able to herald a paradigm shift in the way the market operates. CFD or Contract for Difference is just that when it comes to Crypto currencies.
To demonstrate that we will take the 3 same risks that we outlined earlier in this piece and demonstrate how trading crypto contracts via CFD or a Forex Broker mitigates all of those associated risks.
- Reduced Market Risks:
In the CFD market, there is the opportunity to predict if the market shall go up or down and therefore make a bet to go long or short. In fact, this is the most important and distinguishing factor of CFDs as it allows traders to turn in a tidy profit even when the market is going on a slump.
- No Security Risks:
Since CFDs doesn’t mandate you to physically but an asset, in this case a cryptocurrency, there is almost no discernable chance of getting hacked. Eliminating the cryptocurrency wallet is one of the major steps towards making the entire process more secure and impervious to hackers.
- Reduced Capital Investment:
The one major benefit of CFD being a leveraged product is that traders can trade on margins without paying the entire amount of the physical asset. This means that a lot less capital is being sunk into a single asset which exponentially increases the chances of profit!
However the only downside to this whole new method of trading cryptocurrencies is the fact that not a lot of platforms offer CFD benefits as of right now. Among those who do, Avatrade is one of the biggest and most trusted bitcoin and ripple trading platform that also allows CFD trades. So if you’re looking to dip your toe into the world of trading cryptocurrencies, go try them out!