A simple Google search of the term ‘Cryptocurrency trading’ yields more than 25 million results. This is a sure indication that the subject of cryptocurrency continues to hit the market with a resounding splash, nearly ten years after its invention. In the face of its exponential growth, the crypto market is riddled with problems that hinder successful operations, especially on the part of new investors.
Here are top 10 problems that you should expect in cryptocurrency trading and how you can find your way through them.
Another term for price manipulation is ‘buy walls’ and ‘sell walls’ often initiated by a group of individuals in the crypto market, known as ‘whales.’ In cryptocurrency trading, price manipulation is the number one cause of volatile cryptocurrency markets. Unsuspecting investors are always on the receiving end of this activity by the ‘crypto whales.’
Many inexperienced investors often interpret the ‘buy wall’ sign as a signal for a positive price. Driven by a flawed logic that the price will shoot, they rush to buy. This eventually creates pressure for small-scale investors, who find it difficult to join the market at particular a particular price range. The whales, or major investors, can carry out the manipulation without spending even a cent.
When the price moves in their favor, the whales can relocate their position to squeeze the price range again. As the market changes direction, the walls disappear, and the cryptocurrency prices drop. Cryptocurrency exchanges such as Coinbase, Bittrex, and more can do their part to control price manipulation by the whales. One way to do that is to introduce fees or putting a cap on moving large market positions.
Forex and binary challenges
Another common problem in cryptocurrency trading is the challenge of forex and Binary Options. Currently, many Forex companies such as IQoption, FXPro, eToro, and SimpleFX have listed ‘cryptocurrency trading’ option in their platforms.
These listings often come with a ‘get-rich-quick’ tag that lures thousands of unsuspecting investors, who end up losing all their money in minutes. Unfortunately, professed forex traders fail to understand that Forex brokerages do not target the actual open market. Instead, they prey on the crypto assets of unsuspecting investors, who they use as counterparty. With a combination of some advantages and bonuses, they rig the game just a little bit allow a majority of traders to lose money consistently and in some cases unable to withdraw their profits. Brokers usually don’t reveal this to their customers.
While many traders think that the Forex market is regulated, they forget that the regulator only throws in a disclaimer—that kind of “you may lose all your money” phrase on the website. After collecting the identity details and confirming whether they comply with Know Your Customer (KYC) as well as Anti Money Laundering (AML) rules, the website owner is able to do anything they want with their site.
Some analysts already consider the Forex Retail Industry an unfair step to the receiving end. In order to avoid the problems associated with Forex and Binary Options, crypto traders should not use platforms on which they cannot actually acquire or withdraw their digital currency. Otherwise, they would be trading worthless promises.
Scam and Ponzi schemes
In crypto trading, you can tell whether a project is a scam—they always guarantee a profit. The crypto market has several investment platforms, tokens, mining operations, and coins that promise guaranteed returns. These are obvious scams and Ponzi schemes out to swindle investors of their hard-earned money.
It’s just a matter of time before you find both the website and your money gone. In a Ponzi scheme, you can earn a percentage of your investment, only to lure you to invest more, and eventually end up with nothing. If you see a crypto website with guaranteed profits, consider it the bait to attract you to the platform. The crypto market is unpredictable, so beware of platforms that say otherwise.
Fake news is an obvious problem in the crypto space, picked by editors from social media platforms and forums without proper fact-checking. Once such stories appear on the front page of mainstream publications, they circulate as the gospel truth and absorbed by unsuspecting investors in the crypto space.
However, such news turns out to be false, and the worst part is that the cycle continues. Usually, the audience has no way of determining which cryptocurrency news is a sham and which one is genuine. The public often relies on the mainstream media for the verification. Once out of the press, the citizens will simply consume.
In the end, the public will never discover when they are getting duped—and the media will simply get away with it. Besides, even the mainstream media has its share of flaws in grasping the technicalities of the blockchain technology, including the peculiarities and use cases of individual cryptocurrencies. This often leads to inaccurate reporting of crypto news. The best solution for this problem in crypto trading is to crosscheck the news before sharing them.
Transaction delays in cryptocurrency trading
Another common problem in cryptocurrency trading, delays are present in nearly all transactions. Most crypto platforms are slow—from opening a trade to making deposits or withdrawals. In various chains, it takes forever to complete a transaction, which is a setback on the part of the investor.
Experts identify scalability issues as the main cause of transaction delays on most crypto trading platforms. As many users join the blockchain, the queue gets longer and more transactions get stuck in the queue awaiting approval. Besides, based on the volatility of the market, such delays can be quite costly for investors. Many traders miss viable trading opportunities simply because a transaction did not go through on time.
Transaction delays are just some of the major problems that affect the quality and experience of cryptocurrency trading. It is imperative that key stakeholders in the crypto market develop ways of combating the problem, especially as it relates to scalability.
Lack of price uniformity
If you’ve been a crypto trader, you know that prices of individual crypto assets are never the same across different platforms and at different times. Traders need to come up with price charts to help them conduct investment analysis and trading strategies.
However, with price variation of one cryptocurrency on various exchange platforms, it even becomes difficult to develop appropriate price charting. Besides, the volatility in the crypto market simply compounds everything. Since the crypto space is still growing and new developments are coming up, it is advisable for investors to consult widely before making an investment decision. Information from financial advisors and crypto market analysts could help investors make an informed decision.
Losing a wallet file
Once earned, crypto assets require a safe storage in a secure digital wallet. However, digital wallet loss or theft is one of the problems plaguing cryptocurrency trading. File losses can happen due to hard disk crashes while malware infiltration could lead to theft.
To minimize the problem, traders should have a separate hard copy for their secret keys. Alternatively, they can purchase USB hardware wallets for offline storage.
Error in user address
Another regular problem in cryptocurrency trading is the error in user address, which eventually leads to loss of money during a transaction. For instance, a trader with an Ethereum wallet could easily lose money if the last digits of the address are not copied properly. In the end, the money disappears or more money is transferred to the recipient.
ICOs are popular methods of raising funds in the crypto market. However, some ICOs are merely scams, out to fleece investors of their hard-earned money. Since there is no mechanism to regulate the cryptocurrency market, scammers take advantage of the situation. Until tracking and regulatory mechanisms are developed in the market, the problem will persist.
In a previous article, I mentioned various cybercrime activities in the crypto market. Major hacks and heists have taken place in the cryptocurrency market since its inception, initiated by cybercriminals.
Such activities have resulted in a loss of huge sums of money and some platforms even ceased to operate. When such hacks happen, the prices of particular cryptocurrencies are affected and in most cases, the value drops by big margins.
Precautionary measures to take
The digital wallet is a program in the crypto space to help traders send, receive, monitor, and store their cryptocurrency balances. It also provides timely updates with every transaction. All the same, the most important features of a digital wallet are the private and public keys.
Especially when dealing with a Bitcoin wallet, a trader needs to mention the public key when receiving Bitcoins and mention the private key when sending the cryptocurrency. The private key serves as a password to the digital wallet. Hackers often target the two keys to gain access to various crypto accounts.
To minimize the problem, traders should have a Paper Wallet or Hardware Wallet.
A paper wallet is simply a single key (a series of letters, digits, and special characters) on a piece of paper, which you can use several times as a wallet. Such wallets are free from malware attack. While it could be difficult to find an appropriate backup for paper wallets, traders should just store them in safe deposit lockers.
A hardware wallet, on the other hand, is a special type of digital wallet that stores a trader’s private key. The wallet stores the private key in a protected digital space with no possibility of transfer from the hardware in plain text. To learn more about hardware wallets, read this article.
The blockchain technology and the crypto space are expanding. As more people embrace the world of cryptocurrency, it is imperative to take necessary measures to arrest the growing problems in cryptocurrency trading. With the precautionary measures outlined in this piece, traders can find ways to free up their cash, create new forms of value, minimize transaction costs, and to boost their business processes.
What do you think about the problems in cryptocurrency trading? Join the conversation over at Telegram (https://t.me/coinstaker)
All Images from CoinStaker Library
Tony is a writer for the crypto space. He presents cryptocurrency and blockchain topics to the public in a way that he only can. While carefully researched, this article should not be taken as an express investment guide. Do your own research and consult a financial advisor before you invest in cryptocurrency.
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