Risk and Risk Management.
Hello guys...what's popping? Smiles. It's good to have you back here. I hope you enjoyed my last post, the Concluding part of "phases in the market". Am glad I was able to finally tie it up after a series of post on it.
Today we would be considering the topic Risk Management in crypto. Well it's a very integral part when dealing with crypto investments ,we all must be knowledgeable when it comes to risk. If we lack the technical know-how on how to manage risk, we would surely dance to the tune of losses. Lets get into the discussion right away.
It's no more news that this space can be very slippery and highly risky. The Crypto space is not for the weak. There are alot of risk an investor will face while going about his activities here. Interestingly, the risk an investor would face goes beyond the normal trading risk (i.e futures trading) and the likes.
There are other types of risk he needs to watch out for and manage skillfully if he must succeed in this space. I would like to highlight some of these risks investors would likely face aside the general trading risk we all know about. Lets get into it.
- Volatility Risk
This is one sure risk an investor is exposed to. This is the sharp increase or decrease in the price of assets which could either leave an investor in huge loss or bring him into massive profit. It's a dicey event which could be for or against you because many a times we do not see it coming.
Market sentiment is one of the reason for this occurrence. For us to be safe and be on top of our game, we need to understand how to guard against these risks. Of course I would dedicate another post to this effect showing us how to manage the risk we would be discussing in this post.
- Lack of Regulation
How do you feel when you get to know that you're not fully secured with your investment activities? Scared right? Smiles well, it okay to be scared. Although what many investors stand to gain shift their gaze from the fact that the crypto market is not fully regulated like the traditional financial market.
It's another risk on it own. It therefore means you're exposed to fraud and scams of different kind. A comprehensive knowledge and technical know-how of how things work here will be the only way out of certain mess.
Take for example, in a country like Nigeria where I reside, the government here doesn't support anything cryptocurrency or related activities. If anyone is found using the conventional bank to carry out a a crypto related transaction, the bank account will be frozen.
And if by any chance you fall into the hands of hackers and scammers, there won't be any agency to report to as cryptocurrency have not been fully embraced here and in most part of the world.
- Security Risks
The previous point has actually brought us to this point. An investor would always have to face security risk. Risk of being hacked or falling into all manner of scams. I hope you have not forgotten that in the case of cryptocurrency, you're your own banker.
You have a wallet which function as a vault where money is kept like that of a traditional bank and a key to the vault which is your private key. Of course you're the only one who has access to the key. Hackers know all of these but it doesn't stop them from trying to see if they can gain access to your vault (wallet) through your private Key.
An investor would then learn how to keep his Vault safe and secure so that it doesn't get broken into by means of hack or scam. Pishing link could be sent to unsuspecting investor which could grant these scammers access if they loose their guards.
- Market Manipulation
Market manipulation is another risk an investor is exposed to. I took my time to write extensively on this subject. Knowledge is actually the key to being safe when it comes to market manipulations. Manipulations, in most cases is usually carried out by the big boys in the market.
They are fondly referred to as whales. They pull all kinds of stunts in the market just to take advantage of small unsuspecting investors. Sometimes it's hard to tell when the market is being manipulated by these big guys hence the need to thread carefully and always be at alert.
From findings, these so called big boy find it easy to manipulate assets with low liquidity. If you like trading asset like this then you need to always watch your back.
- Trading Risk
Yeah! The trading risk you are very much aware of. I mean those short term trading in the market...let me narrow it down a little more. I mean future trading where you get to open either a long and short position as you will.
There are risk associated with this trading. In fact it's more risky as you could blow up your entire portfolio in split seconds. Hence the need for risk management such as risk reward ratio, stop loss and the likes so you can up your game in the market.
Of course we would delve even deeper in subsequent post. We have been able to identify all manner of risk an investor faces in the market, we would talk about their managements hopefully in my next post.
There you go friends.I would love to wrap it up at this point. I want to believe you've gotten so much from this piece. As my usual custom is, I would always encourage that you DYOR to be sure of every financial step you would want to take as I won't be liable for any form of loss encountered by you.
Feel free to share with me your thoughts in the comment section. Thanks for your time once again. Gracias!
Disclaimer: This post is made as an education and not investment advice. Digital asset prices are subject to change. All forms of crypto investment have a high risk. I am not a financial advisor, before jumping to any conclusions in this matter please do your own research and consult a financial advisor.
Regards
@lhorgic♥️
https://x.com/lhorgic1/status/1732429702579548256?s=20
Very good topic
Will be sliding in into your next post on risk management
You free to keep sliding in, my blog is actually very slippery...lols. Thanks friend, Am glad you found this post helpful...
Dear @lhorgic ,
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This is an interesting post you have shared on different risk that can be faced in the cryptomarket.
Keep sharing quality post in the community
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