Understanding Cryptocurrency Fundamentals
Cryptocurrencies listed on exchanges are classified under the Payment Services Act based on exchange-provided documentation. Regulatory bodies like Japan's Financial Services Agency (FSA) and Local Finance Bureaus do not guarantee asset values or endorse specific cryptocurrencies. Key characteristics include:
- 🚨 No intrinsic value: Most cryptocurrencies aren't backed by physical assets or government guarantees.
- 🔑 Key-dependent security: Loss or theft of private keys may result in irreversible asset loss.
- ⚠️ Blockchain vulnerabilities: Network failures could render assets worthless.
Critical Trading Considerations
- Volatility risks: Prices may fluctuate dramatically within short periods
- Counterparty limitations: Transactions require mutual agreement between parties
- Regulatory compliance: Verify exchange registration status with local authorities
CFD Trading: Risks & Mechanisms
Leverage Dynamics
- ⚖️ High-risk/high-reward: Margin trading amplifies both profits and losses
- 💸 Potential overloss: Losses may exceed deposited margin amounts
Execution Challenges
| Risk Factor | Impact |
|---|---|
| Bid-Ask Spread | Wider gaps during market turbulence |
| Slippage | Price differences between order and execution |
| System Latency | Delays in order processing |
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Frequently Asked Questions
Q: Are cryptocurrencies legal tender?
A: No, they're decentralized digital assets without government backing.
Q: What happens if an exchange goes bankrupt?
A: Recovery of assets isn't guaranteed, though registered exchanges follow stricter safeguards.
Q: How does leverage affect CFD trades?
A: While enabling larger positions with less capital, it proportionally increases loss potential.
Q: Why do execution prices sometimes differ from quotes?
A: Network latency and sudden market movements cause slippage during order processing.
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Always conduct independent research and understand all risks before trading. This content represents general information only, not financial advice.