Why Investors Keep Losing Money
A huge number of messages on social networks about high earnings on trading and investing in digital assets attracts a large number of newcomers to the industry, who believe that if some people earn on cryptocurrencies, then they are very promising and newcomers will also be able to earn on them.
The main thing is to start investing. However, not everything is so simple in investing. Having invested their funds in digital assets and having bought a lot of cryptocurrencies, newcomers do not always manage to return their investments.
The losses of traders and investors are sometimes very high. And if some earn money and are proud of their successes by posting about it on social networks and the Internet. Then other people lose money and prefer to keep silent about it, hiding losses even from their loved ones.
After all, no one wants to say that you are a loser and have lost your funds. This is evidenced by statistics and conducted research.
United Kingdom's Financial Conduct Authority (FCA) which requires that brokers disclose the percentage of their accounts in the region that are unprofitably trading derivatives on its website, informs the public that 69% to 84% of retail investors lose money.
A study conducted by the U.S. Securities and Exchange Commission has shown that 70% of foreign exchange traders lose money every quarter and traders typically lose 100% of their money within 12 months.
eToro, a multinational broker with 27 million users, informed that nearly 80% of retail investors lost money over 12 months and the median loss was 36%.
This statistic is publicly available and anyone can get acquainted with it. Despite these facts, there are more and more cryptocurrency exchanges and trading volumes continue to grow.
Exchanges report that the number of their users continues to increase. More and more people are trying their luck on such a risky and unpredictable, but promising cryptocurrency market.
Do not forget about the risks
However, upon entering the market, a beginner meets with high volatility of cryptocurrencies and increased risks arising from such volatility. Leverage trading is increasingly being used in cryptocurrencies.
And this means that during sharp market surges, forced liquidations happen. Exchanges in the event of a sharp drop in the market automatically sell all the collateral. This leads to billions of dollars in losses.
And your money on the exchanges in the blink of an eye automatically becomes no longer yours.
All this negatively affects the market, causing huge losses and even bankruptcy. Three Arrows Capital's insolvency negatively impacted Deorbit exchange, which was forced to cover the loss themselves.
Prominent Bitcoin Cash figure - Roger Over, is being sued by the exchange CoinFLEX for $84 million allegedly owed due to such liquidations.
Entering the market, newcomers, first of all, see a huge potential profit, without knowing or thinking about forced liquidations or about other problems, manipulations, and various schemes that dominate in the market.
Newcomers do not understand the complex relationships between exchanges, venture capitalists, market makers and whales that have already formed in the field of cryptocurrency trading.
Beginners should understand that there is no place for amateurs in this market with its competition and strict laws.
The only way for investors to avoid losing money is to abandon high risky trading and avoid trading using leverage, as well as dangerous schemes that they do not understand.
At the same time, in the long term, the cryptocurrency market is growing and investors who invest money for a long term have a chance to make a profit on each of their positions.