While more and more traders join the cryptocurrency market every day, they also make a lot of bad investment decisions. Here, we will go over 3 key mistakes Cryptocurrency traders make.
27 December, AtoZForex – While we are ready to enter the New Year, cryptocurrency market does not seem to be finished with the current one yet. As of now, the overall market capitalization of the cryptocurrency markets stands at $605,420,393,629.
3 Key Mistakes Cryptocurrency Traders Make
Considering the rising public awareness of cryptocurrencies, many new investors are entering the cryptospace every day. It is obvious that some of the amateur traders will make some bad investment decisions. However, this will only contribute to their overall experience. Aside from the beginner traders in the crypto market, some of experienced traders sometimes also make mistakes.
In this small educational piece, we will go over the most common mistakes cryptocurrency traders make.
Market capitalization matters!
Many of the newly coming traders tend to ignore market capitalization. This issue involves amateur investors paying attention to the price of a coin, but not the market cap. They also base their investment decisions on the price of a coin, which can be quite misleading.
This is one of the most common, yet quite illogical ways to approach cryptocurrency trading. While we look into the low-priced coin, it is also vital to note the amount of it circulating on the market. Even though the price of a coin may appear low, it is still worth billions of dollars, thanks to the number of them on the market.
One of the right ways to access the coin is to look at their market cap. This will determine a strong buy – opt for coins with lower market caps than its counterparts.
How much time to dedicate to cryptocurrency trading?
The next big misconception is that experienced traders monitor and interact with the markets every day, 24/7. Moreover, new traders believe that it is necessary to trade full-time in order to receive significant returns.
This is not exactly the truth. While a lot of day traders do spend numerous hours trading, and some of them are quite successful, this is not the best way to handle the trading.
The reality is that the most profitable traders are the ones that dedicate a lot of time to the research. They read about cryptocurrency markets and investigate coins with huge potential. They then buy the particular coin and wait. It is as simple as that. With enough practice, you will be able to identify a profitable project in a matter of some hours.
Comparison to Bitcoin
Presently, there is a myriad of projects that are more advanced than Bitcoin in terms of technological matter. However, thinking that a particular coin will exceed the value of Bitcoin because of its specifications is one of the mistakes you should not make.
There are more than 1,300 now listed on CoinMarketCap, while there are hundreds that are more functional than Bitcoin. They provide better, faster and cheaper solutions than Bitcoin. However, BTC stays on top of the game no matter what. People do not buy Bitcoin because of its tech.
In order to understand whether coin tech is undervalued, it is best to compare the coin to its competitors. Then, compare the hardware and market cap. In case a coin has a better technical side, but the market cap is lower than this of competition, then the coin is undervalued.
Think we missed something? Do you know any other Key Mistakes Cryptocurrency Traders Make? Let us know in the comment section below.