Due to high volatility, the crypto market has attracted many people. In the past few years, the crypto market has become one of the main sources of income for many traders. Despite the fact that some traders and investors have earned a huge profit from the market, still many people are losing away their money.
In fact, most people don’t know how to handle risk while dealing with cryptos. Even some people don’t understand the crypto market properly and make a loss. Being aware of the potential risks of the crypto market can help the traders to manage risk. In this article, I am going to help and guide you to manage risk in the crypto market.
Before that, it is important to understand what is diversification of investment portfolios and why it is important.
Understanding the Risk in Crypto Market
Well, diversification can’t completely eliminate risk but it can help to manage risk. But keep in mind that there are two types of risks such as systematic and unsystematic risk.
The systematic risk is also known as the market risk which can’t be diversified. Because it can’t be reduced or eliminated as it includes exchange rates, uncertainties like war, natural calamity, inflation rate, etc. This risk is present in every industry and company, so the investors need to accept this type of risk.
Unsystematic risk includes business risk and financial risk which can be diversified. These risks