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What are the risks of trading cryptocurrencies?

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What are the risks of trading cryptocurrencies?

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Investing in crypto can be risky – especially if an investor’s expectations are removed from reality.

In addition to risk factors like regulations, the cryptocurrency development space is extremely competitive. Bitcoin has been able to leverage its first-mover advantage to stay on top, but this market dynamic isn’t necessarily going to last forever.

For all the risks of crypto, anyone who has been patient with the space has been rewarded with incredible returns. There are also wild price swings in the crypto markets, which make it a prime space for active traders.

Let’s have a look at some of the most prominent risk factors in the crypto market, and why they could affect token prices over time.

Cryptos are a New Technology

It’s easy to be blinded by the massive price rises in the crypto markets – and forget that decentralized blockchain networks have only been around for a little over a decade.

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Like any new technology, a big round of creative destruction could hit the crypto markets at any time, especially if Proof-of-Stake systems make a big impact on how decentralized blockchain networks operate.

While risks to which token will remain on top do exist, as more investors and companies adopt the technology, the total failure of cryptos becomes less likely. This risk is also assuaged by major governments and central banks, who are creating and spending fiat currency at historic highs.

The Crypto Markets Move Fast

Trading cryptos can be nerve rattling.

In fact, trading the crypto markets without some sort of trading assistant might not be a great idea. The crypto markets are open 24/7, so if you are day trading, it makes watching the charts pretty tough if you are a human that needs to eat and sleep.

While missed opportunities are one thing, the wild price swings in token prices can affect traders at an emotional level.

There are many ways to use automated trading systems in the crypto markets. Some are done with trading bots and allow the trader to use black-box trading systems that require zero human input, while others like Trality Code Editor allow a trader to use basic logic statements to create trading systems.

Whenever leverage is used in trading, the risk of catastrophic losses is very real. With some tokens moving 50% or more in a day, effective risk management and lightning-fast order execution can help a trader get out of a losing position as quickly as possible.

More Regulations are Coming

There is zero doubt that the body of global laws that will regulate crypto ownership and use will grow over the coming decade.

The recent SEC action against Ripple’s parent company, and a few members of senior management, represents a very real risk to any platform that has a company backing it, and also the cryptocurrency industry as a whole.

By deciding to classify XRP as a security under US law (retroactively, some argue), the SEC has made any official sales of XRP a criminal act – which it now plans to prosecute.

The effect on the price of XRP when the legal action was announced was substantial, but it is likely that the SEC is looking to create legal precedence for the entire crypto markets, which makes the current action against Ripple Labs unlikely to be the last.

Decentralization Makes Enforcement Harder

Unlike XRP, tokens like ETH and BTC don’t really have a company that can be pursued with legal action.

This makes it more difficult for governments to go after the tokens themselves, however, it forces legal action to be directed at crypto service companies, like cryptocurrency exchanges.

It is nearly impossible for the global crypto exchange markets to be shut down, as there are many nations that are more than happy to give major exchanges a home, and access to a robust financial system.

In addition, cryptos are now being mined by energy-rich nations like Russia and Iran (via state-centric companies), who also need access to foreign exchange assets, and aren’t on great terms with the nations that control the Western banking system.

An Increasingly Nuanced Market

The total loss of crypto’s value as an asset class is becoming increasingly unlikely. That said, with the advent of Central Bank Digital Currencies (CBDCs), as well as more blockchain platforms that are superior to Bitcoin at a technical level, there are serious risks to consider in the crypto markets.

On a shorter term perspective, trading crypto has never been easy, and today’s market is no different. In addition to heavy volatility, traders have to grapple with news flow that is increasingly global, and involves many more actors than it did even a few years ago.

Risk and Reward in Cryptocurrency

The good news is that with these risks comes opportunity, as many people still don’t understand the crypto markets, or are afraid to deploy investment capital into tokens.

One factor that is becoming increasingly important in the cryptocurrency market is major investors, like Elon Musk, who is likely acquiring Bitcoin as a long-term investment. This is more or less the case with many institutional investors, which does a lot to de-risk the Bitcoin market.

It is important to remember that major tokens are sitting at or new all-time highs in early 2021, which means that almost anyone who ever bought a token like Bitcoin or Ethereum is sitting on profits, as long as they were able to hold on to the position.


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DISCLAIMER Read More

The views expressed in the article are wholly those of the author and do not represent those of, nor should they be attributed to, ZyCrypto. This article is not meant to give financial advice. Please carry out your own research before investing in any of the various cryptocurrencies available.

Source: https://zycrypto.com/what-are-the-risks-of-trading-cryptocurrencies/

Blockchain

AgeUSD to Launch as First Stablecoin on Cardano Network

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Multinational blockchain technology company Emurgo initially announced the AgeUSD stablecoin in January 2021. The firm has since announced a partnership between the Ergo Foundation, Emurgo, and Charles Hoskinson’s Input-Output Global, the parent company of IOHK.

The AgeUSD stablecoin will be available on Cardano as soon as smart contract capabilities are launched on the blockchain, it revealed.

Do We Need Another Stablecoin?

Emurgo is aiming to prevent events like MakerDAO’s Black Thursday which emerged through vulnerabilities in its Dai collateralization mechanism. A mass liquidation of the vast majority of Maker vaults resulted in around $4 million in Dai being under-collateralized at the time in March 2020.

AgeUSD’s so-called “Staticoin” protocol-inspired design does not rely on collateralized debt positions (CDPs).

“Thanks to its design, the scenario that happened on Black Thursday is not possible for the AgeUSD protocol. Without CDPs, we do not have liquidation events nor the requirement for users to perform transactions to ensure that the liquidations actually work properly,”

The stablecoin runs on the Ergo blockchain aiming to automate as much as possible within the mathematics of the protocol itself. Reserve providers pay Ergo’s native currency (ERG) to mint reserve coins which represent the underlying collateral. Users of the stablecoin can also deposit ERG into the reserves in order to mint AgeUSD, it explained. This is only allowed by the protocol if there are enough reserves above its reserve ratio. Banks use a similar method to loan out funds.


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The Cardano partnership will also enable its native token, ADA, to be used as collateral to mint reserves. However, the potential downside is that the stablecoin is only backed by these two assets whereas Dai is backed by multiple cryptocurrencies.

AgeUSD will launch on Cardano when it rolls out the Alonzo update that ushers in Plutus powered smart contracts. This is expected in the latter half of this year according to the roadmap.

Cardano ADA Price Update

As the long-awaited update nears, ADA prices have been cranking to new highs, the most recent ATH being $1.55 on April 14. At the time of writing, ADA was trading up 2% on the day at $1.45 according to Coingecko.

It is the sixth largest cryptocurrency by market cap which currently stands at $46 billion and there are 32 billion tokens in circulation. The token was briefly flipped by Dogecoin but has regained its position in the charts, just below Tether.

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Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://cryptopotato.com/ageusd-to-launch-as-first-stablecoin-on-cardano-network/

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Blockchain

How sustainable is YFI’s current price run?

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The past week saw a lot of growth across the cryptocurrency market, with Bitcoin and Ethereum seeing their values pushed towards new all-time highs. However, it is safe to say that the digital assets market is no longer just about the top two cryptos in the market, with DeFi coins such as YFI registering significant gains on the charts.

Over the past 6 months, YFI has seen its price hike by over 520 percent. Now, while this looks extremely promising for the alt, the truth seems to be in yet another shade of grey. The price hike from over $11k in November 2020 to its press time valuation of $48,415 has been less than straightforward.

Akin to many other altcoins in the market, YFI  too has endured extended periods of the price going back and forth. However, given the current market scenario, how sustainable is YFI’s current price or is history going to repeat itself in the form of yet another short-term price correction?

Interestingly, data provided by Santiment highlighted that despite the bullish nature of the YFI market, there may be a bit of FUD finally creeping into the market as the price continues to remain close to the $50k-level. In such a scenario, what YFI really needs is a strong level of support for the price if bearishness is to soon hit the market.

Source: Santiment

Taking a look at a few of the key fundamentals can provide more clarity on where the price is likely to head in the coming weeks. According to data provided by Santiment, YFI’s supply on exchanges has been stagnant for a while and hasn’t been increasing. While fewer coins in exchanges are normally a good sign of hodling, in the case of YFI, if one were to take a look at past precedents, the price decline began as soon as the supply hit a stalemate.

Source: Santiment

Additionally, the analytics platform also pointed out that the current price rally began with low on-chain activity for the coin. However, over the past few weeks, a trend reversal has emerged, with on-chain activity noting a surge and the price continuing to be inversely relational to it.

With the price inching closer to its ATH, there is always the question of price discovery. YFI seemed to be lacking in this regard, at press time. The coin’s MVRV, as per Santiment’s data, placed it in the danger zone and prime for a new trend reversal, one that can induce a short-term price correction.

Source: Santiment

In the coming days, if the price correction does set in, YFI’s $44k-price level may end up being a key support level for the coin. However, if this level is flipped to resistance in the coming weeks, a lot of the upward momentum and price surge YFI saw over the past few months might be undone.

This, once again, will result in YFI’s price continuing its current trend by which the coin will be subject to strong ‘push and pulls’ at regular intervals.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://eng.ambcrypto.com/how-sustainable-is-yfis-current-price-run

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Blockchain

EOS, Synthetix, Maker Price Analysis: 16 April

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EOS can be expected to find strong support around the $6.8-zone. If Bitcoin stabilizes above the $60.5k-area, altcoins could have a chance of recovery in the coming days. Otherwise, it would be further selling pressure across the market. Synthetix and Maker posted gains over the past few days, but were likely to retrace a significant portion of their value.

EOS

EOS, Synthetix, Maker Price Analysis: 16 April

Source: EOS/USDT on TradingView

EOS was trading within a rising channel, and the past few hours saw the price test the upper boundary of the channel before falling lower.

The mid-point of the channel was ceded to bearish pressure. A region of demand lay just above the $6.8-mark. The confluence with the channel’s lower boundaries could serve as strong support for EOS.

The RSI was back at neutral 50 and would drop lower to signal a shift in momentum to bearish over the next day or two, especially if EOS closes a session under $6.8. This could see EOS fall further to find support at $5.6.

Synthetix [SNX]

EOS, Synthetix, Maker Price Analysis: 16 April

Source: SNX/USDT on TradingView

Synthetix ascended past the $21. 4-level of resistance, but its retest of the same level on the back of strong selling forced the price to drop to $20.7 and could drop further. On the 4-hour, the Supertrend indicator continued to give a buy signal that would only be flipped to sell on a session close under the $19.5-level.

The 20 EMA and 50 EMA (white and yellow respectively) highlighted the bullish momentum behind SNX in recent days, with the price not sinking under these moving averages yet.

The OBV was on an uptrend and suggested that the recent spate of selling was reactionary fear, rather than sustained selling.

Maker [MKR]

EOS, Synthetix, Maker Price Analysis: 16 April

Source: MKR/USDT on TradingView

Two sets of Fibonacci retracement levels were plotted to highlight some levels of importance for MKR. $2,400 is a level that MKR had been stuck under from late February till the past week. The surge past this level in recent days has been rapid, and the price did not stop at many areas to mark it as support or resistance.

As such, the move back down could be almost as rapid, and some of the Fib levels laid out possible areas of support for MKR.

The MACD was correcting lower after the MACD line rose high above the Signal line to indicate overbought market conditions.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://eng.ambcrypto.com/eos-synthetix-maker-price-analysis-16-april

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