The digital money market can be very dangerous for beginner investors. You can lose your savings and trading coins, and without making transactions. We tell you how not to be left without funds due to your own mistakes and protect yourself from scammers
The cryptocurrency market provides many opportunities not only to increase capital, but also to lose it. Savings can be lost due to a sharp drop in the exchange rate of coins, as a result of their erroneous transfer to another exchange or to an exchanger, using the services of scammers and other methods. Analyze all the dangerous moments and explain how not to be left without our money.
The most common risk in the cryptocurrency market is to lose capital on a depreciation rate. The price of digital assets is extremely volatile, it can soar and fall by tens of percent during the day. For example, on March 12-13, bitcoin fell by 50%, and on June 2, its quotes fell by more than $ 1000 in a few minutes.
Experienced traders, in order not to lose coins on a sudden drop in the rate, use special orders - stop loss. When filling out such an application, the user indicates at what price the asset will be sold if it becomes cheaper.
Example. A trader bought Bitcoin for $ 10,000. Then its price rose to $ 10,500. A stop-loss order can be placed at the point of purchase, close the exchange and go about your business. If the coin price drops to the specified level, the system will automatically sell the asset, and the user will not lose anything. When placing a limit stop order, two values are indicated: the price at which the order will work, and the price at which the asset will be sold.
Example: a trader indicates $ 10,000 in the stop field, and $ 9900 in the limit field. If the coin drops in price to $ 10,000, it will be automatically sold at $ 9900.
It is safer to place a stop loss order with a margin. If you put a stop and a limit of $ 10,000, there is a risk that the application will not work. This often happens during a rapidly falling asset price.
Bad investment choice
Another risk is a bad investment. According to the Coinmarketcap aggregator, there are at least 5500 cryptocurrencies on the digital asset market right now. A significant part of these projects is abandoned or was originally created solely for the purpose of raising funds for the project.
Accordingly, there is a high risk of investing in a dubious coin. And the higher it is, the lower the specific asset in the rating by capitalization. However, the leading cryptocurrencies by this indicator do not guarantee profit. For example, Ethereum, the second largest digital asset, now costs $ 240. This is 6 times cheaper than the historic high of $ 1,440.
Therefore, investing in digital assets is extremely important to approach carefully and in all seriousness. You can’t buy cryptocurrency only for the reason that right now it is well known. For investing money, it is better to choose tokens for which there is a project with a real team, product and results.
You always need to think about the fact that any startup can, for example, go bankrupt. Or be created solely in fraudulent topics. If so, then most likely the tokens issued by the project will lose value over time. Therefore, it is important to diversify the investment portfolio - to acquire several different cryptocurrencies.
As a separate item, we identified trade with marginal leverage. This is a tool that allows you to borrow money from the trading floor. In return, she takes your money on bail. If you lose the amount you borrowed from the exchange, it will leave it will take your funds to yourself.
Margin shoulders are now very popular. The reason is that they allow you to increase working capital by two, three and even 125 times. On the one hand, this is an opportunity to earn a lot. On the other, the risk of losing everything at once. For example, on March 12-13, 202, when the bitcoin exchange rate fell from $ 8100 to $ 3800, traders lost $ 5.8 billion in cryptocurrency on margin trading . You should be very careful with this tool, do not use it without sufficient knowledge and preparation.
Often the cause of losses in cryptocurrency is the users themselves. It is common for inexperienced traders to sell assets during a price fall and buy them during its growth. Such a strategy, as a rule, leads to negative results.
There are at least two reasons for this. First, newcomers are greedy. Recommend that you learn to take profits and not regret that the price of the asset continued to rise after its sale.
The second - beginners do not know how to recognize losses. Practice shows that it is psychologically difficult to sell an asset after its price has gone below the level of purchase. But it is much better to do this than, for example, investing in $ 20,000 in bitcoin, and then wait several years to no avail for the opportunity to go to zero.
In order to avoid these mistakes, experienced traders and investors are developing their trading strategy. First, they divide capital into parts. This helps to reduce potential risks and allows you to make several transactions in parallel.
Secondly, they pre-calculate what to do in a given situation. For example, if the price falls 1% below the point of "entry into the transaction" - sell the asset. If it grows by 5% - take profit. It helps to trade without giving in to emotions.
The most dangerous in the stock and cryptocurrency markets is the FOMO effect or a sense of lost profit. It forces not only beginners, but also experienced traders to buy an asset that has risen in price due to the regret that they have not acquired it before. Alas, in most cases this results in a loss.
You can lose money in cryptocurrency without even trading it. The risk that all traders are likely to face is bankruptcy or hacking of the trading floor. Hackers can attack the exchange, as a result of which customer funds will be stolen. Or the company may suffer losses due to loss of popularity. When this becomes known, it is most likely impossible to recover digital assets.
You can also lose money by transferring them to a stock exchange launched by scammers. There are traders in the cryptosphere who like to make money on arbitrage - buy cryptocurrencies on one platform and sell on another, where the course is more profitable.
Attackers attract "arbitrageurs" at inflated prices. If you transfer funds to such a platform, it will not be possible to withdraw them. Technical support may answer that there are technical problems or that users from your country are “not served”.
In order not to transfer funds to fraudsters, recommend that you use only popular sites that have been operating for several years. And also check the history of exchanges on the Internet for complaints.
It is possible to remain without your capital when entering and withdrawing cryptocurrencies. The most popular way to cash out funds is through exchangers.
When using exchangers, the trader transfers funds to the service, in return, he sends cryptocurrency or fiat money to the address specified by the user. There are several dangers here. Firstly, you can stumble upon scammers. If they receive your money, they will simply appropriate it to themselves. To prevent this, recommend that you check the reputation of the exchanger on the Internet. If he was noticed in criminal activity, perhaps someone could write about it on forums or in reviews. Also advise you to start transferring funds to unfamiliar exchangers with a small amount in order to test the service.
The second risk is to make a mistake when specifying the details. When you use the exchanger, you tell him the address to which the cryptocurrency will arrive. If you make a mistake at this stage, your funds are likely to be lost. It is impossible to cancel a transaction on the blockchain.
Successful cryptocurrency trading requires knowledge and not just one month, but possibly many years of training. It’s rare to buy bitcoin and start earning money right away. As a rule, 9 out of 10 users lose and lose their capital over time.
Losses push inexperienced users to rash actions. One of them is trust in strangers. Now in social networks groups are popular where “professional” traders give financial recommendations or simply share their market vision.
Trust such "professionals" must be careful. It is not known what their actual experience in the market is. And most importantly - they are not responsible for your losses. In addition, the problem in this case is not limited to dubious recommendations. Often, "professionals" provide paid services. For example, they sell VIP signals. As a rule, their quality can be checked only after the money has already been transferred.
In addition to signals, “professionals” often provide the option “trust management”. In other words, you transfer your capital to the trader, he trades it, and divide the profit received into two. I do not recommend you conclude such transactions. A “professional” may turn out to be not an expert at all, but a fraudster: he will lose your money or appropriate it for himself. If you are ready to make such an agreement, then be sure to issue a written contract and assure it of a notary public. This will help return the funds if something goes wrong.
ICO and IEO
In 2017, the crypto industry experienced the boom of ICO - the initial offer of coins. Users could invest in a new cryptocurrency before it is added to exchanges. The statistics for the next year showed that more than 80% of such projects were not implemented.
In 2019, a new form of ICO appeared - IEO. Now the initial offer of coins is carried out by trading floors. On the one hand, this to some extent solved the problem with scammers. Exchanges select which projects will be able to participate in the program.
On the other hand, there are no guarantees that cryptocurrency after placement on the platform will cost more than what you pay for it at the IEO stage. Moreover, a study conducted by us in April showed that half of the tokens added in this way to the Binance exchange at that time were trading at a price lower than the initial offer.
Repeat all points
There are many risks in the cryptosphere. The main thing is to lose everything on the fall of the cryptocurrency rate. To reduce the likelihood of this, we recommend that you use stop loss. We also advise you not to buy assets immediately with all the money, but to divide them into parts. And, of course, not to use marginal shoulders without proper preparation, otherwise you can lose money even faster.
It is extremely important to carefully choose the coins for investment. It is better to pay attention to cryptocurrencies, behind which there are real projects that have a real model that can be used in life.
I advise you not to trust unfamiliar traders and especially not to transfer their capital to them. They can turn out to be both scammers and non-professionals who make money selling VIP-signals. And most importantly, i recommend trading only with money that you don’t mind losing.
How not to lose money in cryptocurrency. Instructions for the beginner
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