Understand the risks of trading of cryptocurrencies

Vaasa, Finland – In the volatile world of trading of cryptocurrencies, platforms disappear as quickly as they emerge. This nightmarish scenario has already played for thousands of traders worldwide, with nearly 500 cryptocurrency exchanges failing since 2014. A study by Finnish researchers has finally mapped the DNA of exchange failures. This shows that Crypto traders fully examine the bad signals when assessing the stability of the platform.

Think of cryptocurrency exchanges such as digital stock markets where people buy and sell bitcoin and other digital currencies. These platforms manage billions of trades daily, which makes their stability crucial for investors. The study, published in the Journal of international financial markets, institutions and moneyProvides a complete analysis of 845 cryptocurrency exchanges in the world and has revealed surprising models in the way and why these platforms fail.

Traditional exchanges, called “centralized” because they directly control user funds (similar to the way banks manage accounts), have shown a failure of approximately 27.5% higher compared to “decentralized exchanges More recent which allow users to maintain control of their assets. In fact, decentralized exchanges have shown a probability of failure of 31.2%, largely because their distributed structure helps prevent fraud, mismanagement and liquidity crises.

Singapore has become a particularly striking example of exchange vulnerability, with 41 failed exchanges despite also 55 assets. This model shows how even the experienced financial centers are not immune to these failures. Since the notorious collapse of the exchange of MT. Gox in 2014, which lost almost half a billion dollars in customer funds, around 60% of cryptocurrency exchanges experienced similar destinies.

Geography plays a surprising role in the exchange of survival. Asia leads with 129 active exchanges, while Europe has undergone the greatest number of failures on 60 platforms. Research has revealed that developed and developing countries show similar vulnerability-countries like the United Kingdom, the United States and Australia have lost as many exchanges as they have continued to operate.

Wilned exchanges generally charge 1.5 times more withdrawal fees than those who succeed. In addition, exchanges offering fewer types of cryptocurrencies have shown risks of increased collapse, much like a retail store with limited stocks that have trouble maintaining customers.

Exchanges operating in countries with stricter regulations and better financial transparency are in fact more likely to fail. This counter-intuitive observation suggests that increased monitoring could reveal problems that otherwise go unnoticed, while creating operational charges through compliance costs and infrastructure requirements.

“Even more striking, the exchanges that allow American customers to exchange a probability of higher default compared to those who restrict American customers,” notes the author of the Niranjan Sapkota study, assistant professor at the University of Vaasa, in a press release. This finding seems counter -intive-after all, the United States is known for strict financial monitoring. However, this very regulatory examination could create operational challenges that make survival more difficult.

Research has also identified positive indicators that could help traders choose safer platforms. Exchanges with strong user notes and reference programs have shown better survival rates.

“So, the next time a friend shares a legitimate crypto exchange link link, do not reject him as a simple premium hunt,” explains Sapkota.

From the closure of BTC-E in 2017 on the allegations of money laundering with the spectacular collapse of $ 8 billion in FTX in 2022, the cryptocurrency exchange landscape continues to evolve through cycles D ‘Innovation and crisis. These cases illustrate the complex interaction of the factors identified in research, from regulatory compliance to operational risk management.

Using established financial modeling techniques, researchers have reached an impressive 81% precision rate to predict the failure that would fail. Advanced automatic learning algorithms, including random models of forest and support vector machines, have validated these results and provided additional information on complex relationships between different risk factors.

These results offer practical advice for daily cryptocurrency merchants on the choice of safer exchanges. Warning panels include Excessive withdrawal costs, limited cryptocurrency offers, mediocre user assessments and centralized control structures. Positive indicators include a solid community commitment through reference programs, high ratings of users and decentralized operations that allow users to maintain control of their assets.

The implications extend beyond individual merchants to political decision-makers and industry leaders. Although regulatory monitoring remains important, the results point out that compliance alone cannot guarantee stability. Successful exchanges must balance several factors, including costs of costs, diversity of cryptocurrencies and operational transparency.

In an industry where billions of user assets are at stake, this research transforms the survival of the exchange of conjection in science. The results have a clear choice: to adapt to these newly understood risk factors or risk joining the growing list of failing platforms.