The role of exchange risk in cryptocurrency trade
However, cryptocurrencies on the world market of cryptocurrencies are subject to different risks, including exchange risk. Investors to their ownership of the encryption currency in the US Dollar (USD).
What is the exchange risk?
The exchange risk arises when the price of the currency changes relative to another currency. Cryptocurrencies,
Bitcoin (USD) and its value drop by 20%, your ownership is $ 8,000. The current $ 10,000.
Factors affecting the exchange risk
Several factors affect the risk of cryptocurrency:
- market volatility
: The cryptocurrency market is known for its high volatility, which can lead to significant price fluctuations.
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- Competition of other currencies : Cryptocurrencies often face competition for other currencies with stronger markets.
Exchange risk types
Cryptocurrencies:
- Currency valuation vs. depreciation : The value of the currency can appreciate (to come) or depreciation (Christmas room), leading to profits or losses in the ownership of the cryptocurrency.
2
- Time’s risk of degeneration :
To alleviate the risk of exchange
Although the exchange risk is the natural characteristic of cryptocurrencies, it is not necessary insurmountable. Here are some strategies to alleviate the exchange risk:
- Diversification : Apply investments between different cryptocurrencies and asset classes.
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- Position size : Manage the location size to limit potential losses.
- Regular Balancing of the portfolio : Check regularly and adjust your portfolio to maintain a balanced mix of funds.
conclusion
The exchange risk is an important aspect for investors in cryptocurrency. Diversification, protection and position size can help minimize losses. However, it is necessary to remove.
References
- “Impact of exchange risk on cryptocurrency investments” Investopedia
- “Cryptocurrency Trading: Strategies Motley Fool’s exchange risk”
- “Exchange risk in cryptocurrency: Research” Written by Journal of Financial Markets
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