What are the risks of trading cryptocurrencies?

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.

RISKS

 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: cryptocurrencies are currently unregulated by both
governments and central banks. However, recently they have started to attract
more attention. For example, there are questions about whether to classify them
as a commodity or a virtual currency
 They are susceptible to error and hacking: there is no perfect way to prevent
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. You should
familiarise yourself with these risks before trading these products. 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.

RETURNS

The returns of cryptocurrency can be predicted by two factors specific to its markets –
momentum and investors attention. The more investors are present, the more momentum it gets.
The value rises as more inventors joins.

There is a study that health care and consumer goods industries significantly and
positively co-move with Bitcoin returns, while the finance, retail, and wholesale
industries do not. At the same time, there is evidence that Ethereum returns significantly
and negatively co-move with the financial industry.

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.

Risks of cryptocurrency spread bets and CFDs

With CMC Markets you can trade bitcoin and ethereum via a spread bet or 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 spread betting and 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. The volatility of
cryptocurrencies, combined with trading on margin, could lead to significant
losses.
 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.
This can worsen losses if the market moves against you.
 Charges may be greater than with other asset classes: you should review all
costs involved before you trade. Charges may be higher when spread betting or
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 spread bet and
CFD positions.