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How to Manage Risk When Trading Cryptocurrency All You Need to Know
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How to Manage Risk When Trading Cryptocurrency All You Need to Know
Trading cryptocurrency can sometimes carry risks, especially for new traders. But there are ways to manage risks and become a smarter investor.
Cryptocurrencies are often considered to be volatile and trading them can sometimes be risky. The crypto market has also been known to experience price swings, and like every other investment, there is the chance your investment may sink in value, irrespective of how sure-shot things may seem. That said, risk management is undoubtedly one of the most important aspects of investing in cryptocurrencies.
Here are some ways to manage crypto risk.
Only invest what you can afford to lose
As with any investment, you should never invest more than you can afford to lose. This rule applies to all markets and even more so to cryptocurrencies, which can experience double-digit losses in a span of hours.
There’s no doubt that cryptocurrencies have turned several early investors into millionaires. But at the other end of the spectrum, they have left a number of novice investors in financial peril. Apart from the fact that these assets can quickly lose their value in response to ever-changing government policies, crypto trading platforms can fall victim to a hack or shutdown operations.
In 2021, dozens of people in Singapore filed police reports against a crypto trading platform called Torque. A rogue employee of the company reportedly performed unauthorized trading activities that led to significant losses and customers were restricted from using the platform.
Optimism can affect rational decision-making during market peaks, but it’s important to avoid getting caught up in the hype cycles and unsubstantiated promises. Think before investing your life savings or selling a property to buy crypto.
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