Bitcoin is the original cryptocurrency and the most popular digital asset globally. Millions of traders in both the cryptocurrency and traditional financial spaces are vying to buy the asset as an investment and as a means of value storage. Bitcoin has become a coveted asset on cryptocurrency trading platforms and even for institutional investors on Wall Street who see the potential of its underlying blockchain technology. However, there are risks associated with trading Bitcoin.
Price fluctuations are the first and most obvious risk that comes with Bitcoin and all cryptocurrencies. The cryptocurrency market's high volatility is its most significant advantage and downside. Traders leverage volatility to earn on price differences by applying short, long, scalping, holding, arbitrage, spot, and other strategies. Inexperienced investors and traders lose profits on such volatility if they miss a trend.
Regulation and taxation are other significant risks since most countries do not have a clear regulatory framework regarding cryptocurrencies. While some countries are debating on the use of cryptocurrencies as payments, Nigeria is opting for a pro-crypto approach to stem the growing adoption of cryptocurrencies by the population. Owning digital assets is also subject to taxation in some countries like the United States, while other nations consider different legal means of taxing cryptocurrencies.
Another risk associated with the purchase of cryptocurrencies is the possibility of acquiring assets that could have been used in illegal activities. Among them are terrorist financing, money laundering, human trafficking, and much more. Such 'dirty' Bitcoins and other cryptocurrencies on an exchange wallet can lead to the freeze of funds and a criminal investigation.
A final and no less serious risk is the presence of numerous fraudulent websites that offer the purchase of Bitcoin. Unsuspecting, inexperienced, or novice users can easily fall prey to highly advertised trading platforms that were initially intended as scams. The moment users transfer fiat or cryptocurrencies to get Bitcoin at seemingly lower-than-market prices, they become victims of fraud.
To avoid such risks, Bitcoin traders and investors are encouraged to resort to proven and reliable cryptocurrency services with established partnerships and relevant licenses. Crypto banking infrastructures like Embily, which have bank card services and embedded Bitcoin purchases at low fees, are a go-to solution for wary traders and investors seeking reliable entry into decentralized markets.
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