The conflict between FTX and Binance, two of the biggest cryptocurrency exchanges, was witnessed by many investors this week. After some sharp drops in price of well-known coins like Bitcoin and Ether, the aftermath paints a bleak picture of terrified investors looking for a way to reduce risk and cut their losses.
Others are using this chance to “buy the dip” and profit from falling prices.
The most well-liked methods for buying or selling cryptocurrency typically involve doing so through an exchange using a mobile app or website. But how should you go about buying and selling cryptocurrency safely? It’s complicated, I guess.
Cryptocurrency is inherently risky
In comparison to other assets, cryptocurrencies are still the new kid on the block. There is always some risk associated with investing, but since alternative investments are more recent, risk is almost certainly part of the package. The lax regulations surrounding cryptocurrency are what appeal to so many investors. The regulation of cryptocurrencies is currently less strict than it is for other asset classes like stocks.
The drawback of investing in cryptocurrencies is that you run a higher risk of falling victim to fraud, losing your money in the event of bankruptcy, and suffering significant losses due to increased volatility.
FDIC Acting Chairman Martin J. Gruenberg stated at the Brookings Institution on The Prudential Regulation of Crypto-Assets that “many crypto-assets operate on open, permissionless networks that allow anyone, anywhere to trade on the network, which—by design—makes it difficult to track individual actors.” Additionally, it is nearly impossible to ensure compliance with anti-money laundering and counter-terror financing requirements due to this design element.