Cryptocurrency investing is unlike traditional markets; it's filled with risks, volatility, and inexplicable price changes. In order to avoid losing money, it’s vital to grasp the basics of crypto investment before investing even a dollar.
That said, there are several common mistakes in cryptocurrency investment that can be avoided. Knowing these typical mistakes will take you away from many of the traps that many new crypto traders fall into.
1# Forgetting About Security
While the crypto industry has been safer over the last decade, trading crypto still carries some security risks. Numerous platforms and mobile applications for crypto trading are available nowadays. And these platforms use spoofing, bogus coins, and fraudulent wallet software to steal and monopolize your data.
Always use secure and reputable crypto exchanges. With the growth of crypto platforms, numerous cryptocurrency scam incidents and illegal activities have come to light. To ensure a stress-free trading experience, stay current on market trends.
Never open an account or invest in a site without researching it. Pyramid schemes exist in the crypto industry, so be cautious of sites that pay you to recruit new investors. Take no one's word for it, and exercise caution when getting free money messages. It would be wise to be extremely cautious while receiving skeptical messages.
Never forget about cybersecurity. To protect your account on any crypto exchange from hackers, you should utilize two-factor authentication. The main reason is that, unlike a bank account, there’s no fraud protection or recovery process for stolen assets in crypto.
Keeping your account secure is your responsibility. The extra layer of security is worth the extra effort to learn about and set up two-factor authentication (2FA). In short, take a deep breath, schedule some time, and get this done ASAP.
2# FOMO Trading
If you're new to cryptocurrency trading, be aware that there are many terminologies and phrases that you'll need to understand. One is FOMO (fear of missing out). This expression describes investors who cannot avoid investing in every hyped trend.
FOMO is a well-known acronym among investors. Whether you want to prevent FOMO from your first trade or you simply can't, always do your research. That's the main point.
Today, thousands of cryptocurrencies exist, with more appearing daily. Avoid being swayed by fear of missing out. Instead, listen, educate, and think for yourself. Learn to analyze the market trends.
Don't believe a coin is a good investment because its supporters call it ‘revolutionary.’ Before investing, learn about the coin's whitepaper, background, creators, objectives, etc.
3# Investing In One Crypto Coin
There are new crypto traders who take the traditional approach and choose not to diversify their portfolios. This means they exclusively invest in one form of virtual coin.
It's a risky approach, especially for currencies that are performing well. They’re exceedingly volatile. A sudden market crash could cause a person to lose all or part of their investment.
To avoid this, diversify your currency portfolio and don't put all your eggs in one basket. In this manner, if some coins crash, the losses will be offset by gains from other coins that perform well.
Moreover, if you're totally new to the game, it's recommended to start small. Invest in minimal amounts of Bitcoin and Ethereum. And then gradually increase your investments of less established cryptocurrencies that you've researched and feel confident with.
4# Selling Low Because Of Fear, Uncertainty, And Doubt (FUD)
Nothing is more frustrating than seeing your investment fall. It's tempting to sell a coin that's fast-losing value. The issue is that if the project is solid and nothing important has changed, it can recover.
It's nerve-wracking, but you don't want to sell at a loss just to watch the coin skyrocket a few days or weeks later. Keep in mind that you only lose money if you sell; else, it's just a number.
As mentioned, the cryptocurrency market is highly volatile. Price changes of up to 2% are entirely normal, if not less. This is not to say that you must instantly sell it. If you do, you’ll miss out on increased gains as the price continues to rise.
Recognize price chart trends and speculate responsibly as solid techniques to approach this.
5# Buying A Crypto Coin Just Because It Is Cheap
Some people can't afford to invest a lot in crypto. While this is understood, it’s sometimes more advantageous to invest in a coin that has a guaranteed future. Buying many coins at a discount often results in investing in less established and thus less attractive coins. Be aware of this before investing in a coin.
Avoiding common mistakes is possible and doesn’t require memorizing. Understanding them should motivate you to improve your crypto investing approach.