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What are the risks of trading cryptocurrencies?

CMC Markets

The risks of trading cryptocurrencies are mainly related to its volatility. They are high-risk and speculative, and it is important that you understand the risks before you start trading.

  • They are volatile: unexpected changes in market sentiment can lead to sharp and sudden moves in price. It is not uncommon for the value of cryptocurrencies to quickly drop by hundreds, if not thousands of dollars.
  • They are unregulated: as a decrentralised currency, cryptocurrencies are currently unregulated by both governments and central banks. They were developed to be free from government oversight or influence and are instead monitored by peer-to-peer internet protocol.
  • They are susceptible to error and hacking: as a digital currency, cryptocurrencies are susceptible to technical glitches, human error or hacking.
  • They can be affected by forks or discontinuation: cryptocurrency trading carries additional risks such as hard forks or discontinuation. When a hard fork occurs, there may be substantial price volatility around the event, and we may suspend trading throughout if we do not have reliable prices from the underlying market.

We will endeavour to notify you of potential blockchain forks. However, it is ultimately your responsibility to ensure you find out when these might occur.

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Risks of cryptocurrency and CFDs

With CMC Markets you can trade bitcoin and ethereum via a CFD account. This means you are exposed to slightly different risks compared to when buying these cryptocurrencies outright. 

  • They are high-risk speculative products: with CFD trading you only need to deposit a percentage of the value of a trade to open a position. Profits and losses are based on the full value of the trade.
  • They can be affected by gapping: market volatility can cause prices to move from one level to another without actually passing through the level in between. Gapping (or slippage) usually occurs during periods of high market volatility. As a result, your stop-loss could be executed at a worse level than you had requested.
  • Charges may be greater than with other asset classes: you should review all costs involved before you trade. Charges may be higher when trading CFD cryptocurrencies. The likelihood of making a profit versus the impact of these fees should be considered.
  • Pricing variations: compared with currencies, there can be significant variations in the pricing of cryptocurrencies used to determine the value of CFD positions.

You should ensure that you fully understand the risks associated before you start trading. Only invest if you are an experienced investor with sophisticated knowledge of financial markets. Cryptocurrency trading may not be appropriate for everyone. We recommend that you seek independent professional advice, if necessary, before deciding whether to start CFD trading.

Cryptocurrencies, which are generally unregulated in themselves, are high-risk, speculative investments, which will impact any cryptocurrency CFD trades that you enter with us. The value of cryptocurrencies, and therefore the value of CFD Trades linked to them, is extremely volatile. They are vulnerable to sharp and sudden changes in price due to unexpected events or changes in market sentiment. CFD Trades are leveraged products. Therefore the combination of increased volatility and leverage has the potential to significantly increase your losses if the market moves against you, relative to CFD Trades based on other products. Furthermore, there are general risks in trading cryptocurrencies. Cryptocurrencies are unregulated in Singapore. There are also cybersecurity risks, given cryptocurrencies are virtual currencies. Accordingly, you should only invest in cryptocurrency CFD Trades if you consider that you have the knowledge and experience of, and fully understand the risks associated with, both CFDs and cryptocurrencies.

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