What is cryptocurrency and how does it work?

Cryptocurrencies have grown to be one of the most exciting and intriguing trading markets out there. These digital currencies have grown from niche interest to mainstream attention, and are quickly becoming the investment choice of a generation. But, with all investing comes risk. When it comes to cryptocurrencies, what risks should traders be aware of? 

To understand trading risk with cryptocurrency, it is first important to understand why traders trade them. For many, trading cryptocurrencies can offer attractive returns due to the inherently volatile nature of these assets. 

Furthermore, cryptocurrencies have a finite supply and increased demand, creating conditions ripe for price growth and giving traders the opportunity to capitalize on these gains. As well, cryptocurrency trading can be an attractive asset class to diversify a trading portfolio, since digital currencies are still largely uncorrelated with other asset classes. 

But, as with all forms of trading, risk is always a factor. Since cryptocurrency is a largely speculative asset, there is the possibility of experiencing large price fluctuations and losses as a result. This risk increases when leveraging cryptocurrency with margin and can even put investors at risk of losses far beyond their initial capital invested. 

Furthermore, cryptocurrency trading is subject to certain risks from market structure and underlying asset prices that could result in market manipulation, fraudulent trading, and theft of coins. 

To protect against such risks, traders often turn to cryptocurrency CFDs. CFDs are contracts for difference that provide a way for traders to gain exposure to an asset without taking physical ownership of it. 

When trading cryptocurrencies via CFD, traders gain the ability to trade without the security risk of direct ownership. Additionally, the use of CFD products allows traders to leverage their trading positions, opening the doors for enhanced risk management techniques like stop loss orders, limiting losses when an unexpected downturn occurs.

Overall, cryptocurrencies present an exciting opportunity for traders to capitalize on a volatile market, however they must also remain aware of the inherent risks associated with trading this asset class. Through the use of cryptocurrency CFDs, traders can protect against losses while still reaping the benefits of digital currency investing.