Cryptocurrencies – like any trading instruments – are never risk-free. The potential to generate profit is matched by the potential to make a loss. But this in itself shouldn't put you off trading crypto. As long as you know the risks, you're best placed to make crypto trading work for you.
But it's worth bearing in mind that there are some risks that are unique to the crypto market.
Digital: Bitcoin and other cryptocurrencies exist purely in the form of digital codes. There are no tangible assets to possess. The foundation of these currencies are types of database called blockchain. Encryption offers a significant amount of security, but hacking threats remain.
Regulation: As cryptocurrencies grow in popularity, regulation has failed to keep pace. Many countries don't regulate their use or consider them to be legal tender. In the UK, the FCA has deemed crypto products as being only suitable for professional clients – not retail clients.
Volatility: The crypto market is arguably the most volatile market for traders to invest in. As such, the change in price from one moment to the next can be sudden and dramatic. This has the potential to magnify your profits. But it can also have the same effect on your losses.