Economy
Understanding Forex and Cryptocurrency Risks
The global financial market is no longer limited to banks and traditional assets. Today, investors move money between foreign exchange (forex) and cryptocurrencies. Both markets offer opportunities, but they also carry risks that need careful control.
Forex is the world’s largest financial market, trading more than $7.5 trillion a day, according to the Bank for International Settlements. Cryptocurrencies are smaller but far more volatile and less regulated. Investors who stay disciplined usually do better than those chasing fast profits.
Leverage and Market Exposure
In forex, one of the main risks is leverage. Brokers allow traders to open large positions with only a small deposit. This can increase profits, but also makes losses bigger. Even a price move of less than one percent can wipe out an account.
Crypto trading has similar dangers. Prices can fall by double digits in a single day. For this reason, stop-loss strategies are essential in both forex and crypto to avoid sudden, heavy losses.
Beginners who want extra guidance can turn to trusted trading guides for beginners, which explain how to manage risk, use leverage safely, and build a structured approach to trading.
Liquidity and Price Swings
Forex usually has high liquidity and fast execution. But during events like central bank decisions, political crises, or natural disasters, spreads can widen. This leads to higher trading costs.
Currencies also respond to interest rate changes. For example, when the US Federal Reserve raises rates, the dollar often strengthens and emerging market currencies weaken. Traders who ignore these cycles face unexpected risks.
Crypto markets face different liquidity problems. Bitcoin and Ethereum trade in large volumes, but many smaller coins lack depth. This makes it hard to exit positions quickly without big price losses.
Counterparty and Security Risks
Forex trading also carries counterparty risk. Regulated brokers protect client funds by keeping them separate from company money. Unregulated or offshore brokers may not do this, which puts investors at risk. Always check a broker’s licence before opening an account.
For crypto, the biggest issue is security. Wallets and exchanges are common targets for hackers. Billions have been lost through scams and breaches. Using cold storage, two-factor authentication, and strong passwords is critical for protecting funds.
Regulation and Government Policy
Forex has strong global oversight, with regulators in Europe, North America, and Asia setting clear rules. These create a safer environment for traders.
Crypto, on the other hand, is less predictable. Government actions such as tax rules, exchange bans, or restrictions often trigger sudden sell-offs. Traders who fail to follow regulatory updates can face heavy losses.
Risk Management Practices
Good risk management is central to long-term success. Traders should commit only a small part of their capital to each position. Stop-loss orders limit sudden shocks, while diversification across different assets reduces overall risk.
Ongoing learning is also critical. Monitoring central bank calendars, blockchain updates, and regulatory changes helps traders prepare for moves. Backtesting strategies and using demo accounts create extra layers of preparation. Nigerian traders can also find useful guidance in forex trading tips, which cover current trends and practical tools in the local market.
Practical Steps for Traders
To reduce risks, traders should:
- Use leverage with caution.
- Choose licensed and secure platforms.
- Expect high volatility in digital assets.
- Follow global economic indicators.
- Keep clear records of all trades.
Forex and crypto will continue to attract investors looking for growth and diversification. But both markets carry serious risks, from leverage and liquidity to regulation and security. Traders who stay disciplined, informed, and cautious have a better chance of building consistent results.
By Adedapo Adesanya
The Naira opened the week on a negative note on Monday after it depreciated against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) by 0.86 per cent or N11.77 to sell for N1,373.16/$1 compared with the preceding session’s value of N1,361.39/$1.
It also weakened against the Pound Sterling in the official market during the session by N17.39 to quote at N1,871.07/£1 versus last Friday’s rate of N1,853.68/£1, and against the Euro, it slumped by N15.78 to close at N1,618.41/€1 versus N1,602.63/€1.
At the black market, the Nigerian currency lost N5 against the Dollar yesterday, settling at N1,385/$1 compared with the previous rate of N1,380/$1. At the GTBank forex desk, it depreciated by N3 to sell at N1,375/$1 compared with the previous value of N1,372/$1.
Nigeria’s external reserves have fallen below $48.4 billion as of May 8, driven by interventions and external obligations by the Central Bank of Nigeria (CBN). In the first three weeks of April, the country’s FX reserves lost about $731 million.
Softer liquidity conditions have also dampened foreign investors’ appetite, with data from the FMDQ Securities Exchange showing that total foreign exchange inflows declined by 30.1 per cent month-on-month to $2.86 billion in April from $4.09 billion in March. Out of this, foreign inflows weakened by 21.9 per cent to $1.63 billion from $2.09 billion in March.
As for the cryptocurrency market, prices were largely up as global equity markets and other risk assets came under pressure. Rising oil prices, higher treasury yields and renewed US-Iran tensions, along with a key inflation report from the world’s largest economy due on Tuesday, applied pressure.
Binance Coin (BNB) jumped 1.5 per cent to $662.80, Solana (SOL) appreciated by 0.9 per cent to $96.63, Dogecoin (DOGE) added 0.7 per cent to close at $0.1104, Bitcoin (BTC) improved by 0.5 per cent to $81,221.78, and Ripple (XRP) gained 0.5 per cent to sell at $1.46.
On the flip side, Ethereum (ETH) went down by 0.9 per cent to $2,310.49, Cardano (ADA) weakened by 0.4 per cent to $0.2776, and TRON (TRX) slid by 0.3 per cent to $0.3487, the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closed flat at $1.00 each.
By Adedapo Adesanya
Crude oil prices rose more than 2 per cent on Monday after US President Donald Trump said the ceasefire with Iran was “on life support,” leaving the Strait of Hormuz largely closed with no clear end in sight to the war.
Brent crude futures went up by $2.92 or 2.88 per cent to $104.21 a barrel, while the US West Texas Intermediate (WTI) crude futures increased by $2.65 or 2.78 per cent to settle at $98.07 a barrel.
President Trump on Monday said the ceasefire with Iran was “on life support,” after dismissing Iran’s response to a US peace proposal as “stupid.”
This came after the US floated a proposal aimed at reopening negotiations with Iran. The Middle East country on Sunday released a response focused on ending the war on all fronts, including one where America’s top ally, Israel, is fighting Iran-backed Hezbollah militants.
Iran also demanded compensation for war damage, emphasised its sovereignty over the strait, and called on the US to end its naval blockade, guarantee no further attacks, lift sanctions and remove a ban on Iranian oil sales.
After this, President Trump dismissed the offer in a social media post as “totally unacceptable.”
He also emphasised that the US continues to monitor Iran’s enriched uranium stockpiles via Space Force surveillance and warned of further strikes if a real end to the nuclear issue is not reached.
The war has impacted oil output by the Organisation of the Petroleum Exporting Countries (OPEC) as it declined to its lowest level since 2000, with production falling by 830,000 barrels per day to an average of 20.04 million barrels per day in April, according to a Reuters survey published Monday.
Kuwait, Saudi Arabia, and Iraq all saw significant output decreases as they were forced to shut in production due to the war, which started in late February.
The United Arab Emirates (UAE) was the only Gulf member that was able to increase production in April. The UAE was able to leverage the Fujairah terminal on the Gulf of Oman to bypass the bottleneck, allowing it to export more crude than its peers. The Emirate is targeting a production capacity of 5 million barrels per day by 2027 after it exited OPEC and OPEC+ this month.
By Dipo Olowookere
A 2.33 per cent surge recorded by the Nigerian Exchange (NGX) Limited on Monday pushed its year-to-date (YtD) gain to 60.97 per cent.
This means that the local stock market has gained over 60 per cent this year. This performance has been triggered by a strong appetite for domestic equities, especially from investors with hot money.
Yesterday, the All-Share Index (ASI) rose by 5,705.59 points to 250,481.42 points from 244,775.83 points, and the market capitalisation expanded by N3.160 trillion to N160.254 trillion from N157.094 trillion.
Business Post observed that all the key sectors of the bourse ended in green, with the banking index growing by 4.67 per cent. The industrial goods space increased by 4.32 per cent, the consumer goods counter improved by 0.74 per cent, the insurance sector advanced by 0.59 per cent, and the energy segment soared by 0.03 per cent.
Investor sentiment was bullish as Customs Street ended with 57 price gainers and 21 price losers, implying a positive market breadth index.
The quintet of Livestock Feeds, Integrated Energy Insurance, RT Briscoe, FTN Cocoa, and Union Homes REIT chalked up 10.00 per cent each to sell for N8.80, N2.86, N16.50, N9.13, and N77.00, respectively.
On the flip side, Prestige Assurance lost 10.00 per cent to quite at N1.44, University Press declined by 9.09 per cent to N4.00, Tantalizers slumped by 7.69 per cent to N4.20, NPF Microfinance Bank crashed by 6.25 per cent to N6.00, and Mutual Benefits went down by 5.72 per cent to N4.12.
During the session, market participants traded 1.5 billion equities worth N68.5 billion in 94,834 deals versus the 1.1 billion equities valued at N55.0 billion transacted in 69,996 deals last Friday, indicating a rise in the trading volume, value, and number of deals by 36.36 per cent, 24.55 per cent, and 35.49 per cent, respectively.
At the close of transactions, Veritas Kapital was the busiest stock with a turnover of 194.6 million units valued at N299.1 million. Access Holdings sold 172.1 million units for N4.2 billion, First Holdco exchanged 132.0 million units worth N9.8 billion, FCMB traded 123.9 million units valued at N1.4 billion, and Champion Breweries transacted 83.0 million units worth N1.3 billion.
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