Quite alot of people in the cryptocurrency space lose money instead of making money and that's well associated with their approach and their view of the market and often these come in with unrealistic expectations with their own perceived idea of what they believe cryptocurrency investment is all about.
Well in the cryptocurrency space we can invest and trade easily and many who are involved in either one of these either investment of active traders lose alot at times and I would be discussing today in continuation to my first article on this as to the reason contributing to these or really why people do lose lots of money here.
The following reasons behind this involves;
Emotional Trading
Many who come in here either do so out of emotion with no foresight or grounded knowledge on what they are entering and information like the core values of a project is often not being looked at which would have helped one see how legit a project is and if it's worth holding for long term meaning no need to panic during temporary dips in price.
But ofcourse these things most times are not considered by most individuals and as such they set themselves up for great loss as they merely act out of emotions, when they see market buying or bullish they would want to jump in so as not to miss out and when market is bearish they would rush to sell out of fear of losing everything if they hold on for much longer. Now this is a novices moves and one driven by emotion.
So emotional trading is one thing that contribute to investors losing money in cryptocurrency and should be avoided.
Regulatory Risks
Another contributing factor why people lose money here lies on the fact there is changing regulations concerning cryptocurrency use and this often affects the cryptocurrency market depending on what the new laws is as unfavorable regulations could cause sudden dip in price as a favourable one would cause price to appreciate more.
The market respond to sudden regulatory change and if am event it changed for the worse those already invested may incur a considerable amount of lose which the person didn't think about at first, so government could also determine if one suffers loss or not in here.
So regulations is one of the reasons why people may suffer loss in this market especially in an event of ban or regulation change.
Security Issues
We also have concern of security which could lead many to suffer great loss here and this may not necessarily be due to carelessness from the individuals but due to their exchange of choice being targeted, most who have assets on centralized exchange could experience loss in an event of security breach as there are possiblity of hackers attempt on a centralized exchange and this seriously puts their asset at great risk.
Also apart from ones exchange being hacked or exposed doe those who are smarter enough to keep their asset on a decentralized wallet they often experience loss too if they misplace their private key it could give others access to their wallet and make them loss all their assets which is also bad for business and often unrecoverable.
So these are some security risk that people in this space are faced with and that often lead to people experiencing great loss.
Overleveraging
For those who trade on futures they also often stand a chance of losing more money than they would have liked to especially for those who doesn't apply proper risk management and often overplay their hands by overleveraging, when traders over leverage they expose themselves to more risk.
When traders use more leverage than they should it places them in a more vulnerable state, yes granted they could gain more at the same time stand a chance of losing even more than they would have want to.
So over leveraging is bad and one of the reasons why one could experience great loss here and part of the reason why people lose money in cryptocurrency.
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Conclusion
It's important for all coming into the space to not only know but understand the risks involved and that one could loss money here, that's really important if they are to manage around the risks prevalent in the market and atleast reduce losses to an extent that is manageable.
17.163 SRY