The primary danger associated with trading cryptocurrency is its volatility. They are speculative and high-risk, so it’s critical that you are aware of the hazards before you begin trading.
They are erratic; abrupt shifts in market mood can cause fast price fluctuations. Cryptocurrency values frequently plunge sharply by hundreds or even thousands of dollars.
They are unregulated: At the moment, neither governments nor central banks have any control over cryptocurrencies. They have, however, recently begun to get increasing notice. For instance, it is debatable whether they should be categorized as a commodity or a form of virtual cash.
There is no foolproof way to guard against technological malfunctions, human error, or hacking, therefore they are prone to both.
Forks or discontinuations may have an impact on them: Trading cryptocurrencies entails additional risks, such as hard forks or discontinuations. Before trading these items, you should become familiar with these dangers. If we do not receive accurate pricing from the underlying market during a hard fork, we may cease trading. Hard forks can cause significant price volatility.
We’ll try to let you know if there are any potential blockchain forks. But ultimately, it’s up to you to make sure you learn when things might happen.
Risks of CFDs and spread bets on cryptocurrencies
You can trade bitcoin and ethereum with CMC Markets using a spread bet or CFD account. This indicates that the risks you face are slightly different than those associated with direct purchases of these cryptocurrencies.
They are high-risk speculative products: to open a position in spread betting and CFD trading, you just need to deposit a portion of the trade’s worth. The total value of the trade is used to calculate profits and losses. Trading on margin in combination with the volatility of cryptocurrencies may result in substantial losses.
Gapping can have an impact on them: Because of market instability, prices may swing from one level to another without really crossing the dividing line. Gapping (also known as slippage) typically takes place during times of extreme market volatility. This means that your stop-loss may be applied at a lower level than you intended. If the market moves against you, this might make losses worse.
Charges could be higher than with other asset classes: before you trade, you should research all associated fees. When spread betting or trading CFD cryptocurrency, fees could be greater. It is important to weigh the possibility of making a profit against the effect of these fees.
Pricing variations: When compared to currencies, the prices of cryptocurrencies used to calculate the value of spread bet and CFD positions might vary significantly.
Before you begin trading, make sure you completely comprehend the dangers involved. If you are a seasoned investor with thorough knowledge of the financial markets, only invest. Trading cryptocurrencies might not be suitable for everyone. Before choosing to begin spread betting or CFD trading, we advise that you, if required, get independent expert counsel.
CFDs and spread betting are governed by the FCA. This means that companies that offer CFDs and spread bets on cryptocurrencies must be authorized by and under the FCA’s supervision. Financial Ombudsman Service (FOS) accepts individual complaints, and the Financial Services Compensation Scheme is available to consumers who qualify (FSCS). These safeguards, however, won’t make up for any trading losses you might incur.