The cryptocurrency market in 2021 is dynamically growing, highly profitable, and open to all categories of investors. But, at the same time, it remains a high-risk segment. Yes, it is still unregulated and directly inaccessible to influence from government commissions and oversight, but this has both its pros and cons for investors.
Market advantages and disadvantages
In addition to the advantages mentioned above, the list includes:
- low entry threshold – any investor can start trading, even with a budget of several hundred or thousands of dollars;
- a large selection of assets – there are already about 10 thousand investment and trading instruments on the market;
- a large number of trading platforms and exchanges around the world;
- in many countries there is no taxation of income derived from trading in virtual assets;
market age – over 12 years a whole ecosystem has been formed. With wallets, exchange offices, exchanges, payment gateways, and there are also investment companies and hedge funds that provide trust capital management services.
The main disadvantages are:
- high volatility – the price of assets on the crypto market can sometimes rise or fall by up to 10-50% or even more per day. This allows successful traders to receive high profits, while inexperienced players can get huge losses (up to the liquidation of the deposit);
- cartel collusion – large players (whales) can collude with the aim of making a profit on artificially created strong fluctuations in the exchange rate (pump&dump), taking advantage of the absence of regulators and punishment for the dissemination of insider information;
- dependence of trading platforms on the decisions of regulators in a local jurisdiction – if cryptocurrencies are banned in any country, exchanges need to either promptly block services to users who are citizens of this country, or close their offices there;
- the use of courts by regulators in the fight against virtual assets – if a regulator initiates the opening of legal proceedings, having some doubt about the status of an asset, this can cause a strong drop in its rate (for example, after the SEC in December 2020 filed a lawsuit against Ripple and XRP coin, the value of the asset dropped by 75% within a week (from 67 to 17 cents);
- exchanges may close or fail to fulfill their obligations – even the largest trading platforms are not immune from hacks, liquidity drops, delays in order execution, or withdrawal operations.
Considering all of the above, and taking into account a large number of risks, investing in cryptocurrencies must be approached carefully and responsibly. Everyone knows the phrase that you can’t put all your eggs in one basket. In this case, it is necessary for relation to investing taking into account the diversification of risks. As you know, it is advisable to invest free funds in different markets and asset classes. After all, you never know which investment will bring the maximum profit, and which – only losses.
In relation to the cryptocurrency market, we recommend investing no more than 20% of the amount of free capital intended for investment. The digital asset market is interesting, every year it attracts more and more traders, but it is constantly subject to various manipulations, a sharp change in trend, technology wars, and the loss of leadership positions even among assets that have been on the market for a long time and have managed to gain a reputation as “blue chips”.
The cryptocurrency market is very volatile. Liquidity on a number of instruments can disappear in a second – just a moment ago it was quite impressive, but now it only decreases there. Exchanges artificially increase volumes for getting a higher rating, and it is difficult for an inexperienced trader or investor to understand which trading platform is the most suitable for trading a certain asset. It is simply unrealistic for a novice investor to keep track of all this in real-time, where it is sometimes necessary to make a decision within one or two minutes.
In order to constantly get profit from all changes, without losing, but increasing your capital, you need to trust the professionals who have adopted algorithms and time-tested tools for automating asset trading and collecting analytical data.
The Best Choice
For example, in cooperation with FOBS Asset Management. By entrusting this company with the management of its assets, it becomes possible to neutralize the influence of the following adverse factors in the cryptocurrency market:
- preserve the investment portfolio or minimize its losses in the event of a sharp and massive capital outflow from the market;
- ignore the manipulations of exchanges and market-makers with inflated volumes, fictitious prices, and “walls” of orders in the order books, giving FOBS Asset Management the right to choose the most profitable and reliable trading platform (platforms) in a specific period of time for trading a specific instrument;
- completely exclude investments in risky assets (which, due to premise and a large advertising budget, can create an image of a reliable and promising investment haven for some time through paid media or purchased influencers), which in reality are so-called garbage assets (shitcoins);
- does not worry about fluctuations or falling liquidity due to the fact that monitoring systems of FOBS Asset Management in 24/7 mode control all key metrics, (such as real volumes of trade, supply, and demand, market depth), large liquidations or capital entry into the market, and etc. All this helps the company to understand market trends and manage assets under management as efficiently as possible.
At the same time, FOBS Asset Management, due to a quality trading system and strategy developed and tested over the years, the use of algorithmic trading, scrupulous processing of analytical data, the presence of highly qualified traders in the staff, is able not only to save but also to increase the capital of its clients.