Crypto investment mistakes you should never make!

July 19, 2019, | AtoZ MarketsCryptocurrency has the reputation of a highly profitable asset on which you can earn very easily and quick. However, just wanting to buy and sell crypto assets is half of the deal. The most difficult is not to overestimate your knowledge of crypto trading and avoid the most common crypto investment mistakes. If you do not do certain crypto investment mistakes, your chances of increasing your capital rather than being left without money will become much higher.

How to start?

If we speak about any kind of investing, it is usually all about well-prepared strategy, patience, knowledge and a little bit of luck. Investing in crypto at the right time sometimes requires a certain amount of fortune. However, only those who improve their cryptocurrency investment strategy and learn from their past mistakes, gather profits. So what are the basic crypto investment mistakes that an experienced and newbie investor should avoid?

Overestimate your knowledge of the cryptocurrency 

Do not rush to trade. It will be very useful if you take some time and develop a basic cryptocurrency trading strategy and learn how does cryptocurrency works. Make sure you understand exactly what you are going for and do not risk more than you can afford.

Find educational sources you trust, take your time to learn the basics of blockchain technology and Bitcoin, what circulating vs total supply means. Try to understand what inflation is. Find out more about crypto exchanges, crypto wallets, private keys, and public keys. Take your time and find the right exchange with the best fees. Learn more about the taxes, you might have to pay if you start to trade. 

It is also essential to understand the basic maths behind trading. If you don’t understand the real implications of a 20% drop, do not rush to trade. For example:

If an asset drops 50% in price, it does not need to raise 50% to break even again. It, actually, needs to raise 100%. 

Once you understand what supply and demand mean, you should learn how to read trading charts or technical analysis. Technical analysis helps better predict the future by analyzing historical market data. You’ll gain a feel for when markets are about to turn, or if assets aren’t priced properly. 

For some, it’s super helpful and core to many people’s cryptocurrency investment strategy. The more you understand, the better.

Believe in guaranteed returns and rely on social media

The developers and start-up project managers of any blockchain company cannot know for sure – how long their crypto project will keep bringing profits and how long it will last. No one knows what price will be Bitcoin trading tomorrow, even tonight. What to say about small startups? 

Investors need to understand all the risks, and if they are not warned about them, it is worth considering them. The last thing you can promise in the cryptocurrency market is a guarantee of something. 

Sometimes people’s investments in crypto are based on the news they get from social media, like Twitter or Facebook. Different publications also might have an impact on the investors’ strategy. The media could be spreading news, for example about India banning Bitcoin, or about how Wall Street opposes the crypto industry. Biased headlines are the foundation for propaganda. A lot of these news articles are intended to generate clicks and controversies and very often are exaggerated and overhyped.

Invest more than willing to lose and overtrade

Some newbie investors, want to make 20 trades a day, which is the biggest investment mistake. Usually, most of them lose from exchange fees or because they make bad trades and then trade more to recover their losses. Trading too much leads to poor decision making.

The digital assets are extremely volatile, their prices fluctuate very often. In no case, you should take a loan, sell a car/apartment to start trading crypto. The stories of the winners who invested in time and are now secured to the end of their lives are built on the multiple numbers of losers left with nothing.

Crypto should be treated as a game because a lot depends on luck, and even the most experienced traders and investors may face losses in this market. Experts recommend investing no more than 5% of the deposit, too unpredictable cryptocurrency market. Perhaps this is the main rule, which is always to remember when working with cryptocurrencies because any risk must be justified.

Work with cryptocurrency cloud mining

A few years ago it was quite realistic to make money on cryptocurrency cloud mining. But there were and still, are more scammers in this area than honest companies. The main thing is that the majority of firms that offer such services guarantee high and quick profits. 

Invest in an ICO without a minimum viable product

Now the ICO field has faded into the background, and companies have started to attract funding through IEO, but not everyone can take part in them. One of the main problems for ICO is just an idea, without a minimum viable product. In addition, most ICOs might be fraudulent, they do not bring any profit to investors, even if the team does not seek to deceive anyone.

FOMO, FUD and Panic Sell

Apple co-founder Steve Wozniak once said he sold all his Bitcoin when the price was close to a record level of $ 20,000 not to worry about the constant fluctuations of its course.

This is one of the important tips for investors in digital money – you need to be cool, patient, never lose your temper and not look at the chart all day. 

Many people who come to the crypto market, strive to make money quickly on the growth rate, they buy assets as quickly as possible and practically do not analyze the situation. In the crypto community, such behavior could be called a Fear of missing Syndrome or FOMO. It is a very common behavior in the crypto space. To avoid this mistake, you should ignore the hype and analyze the facts. 

Contrary to FOMO, FUD is short for fear, uncertainty, and doubt. The goal of FUD is to get you to sell, not buy. Certain bad actors operating in crypto space want to make investors start selling their cryptos at a lower price. To do this the scammers start spreading bad news about security vulnerabilities, hackings, team changes, or anything to cause people to Panic sell and lose faith in the project. However, if you rely on logic, you can avoid making such a mistake easily. 

Poor diversification of investments

Beginners, usually, think about investing in Bitcoin, but there are thousands of other cryptocurrencies, and some of them grow in price much faster than the most popular cryptocurrency. Diversification, in other words, investing in multiple assets, can help you to avoid crypto investment mistakes. 

The experienced investors usually pick a number of coins that can keep track of. The experts recommend investing in a maximum of 10 cryptocurrencies at a time.

Underestimate security precautions

The last but not least mistake which newbie crypto investors do is when they pay little attention to the security of the cryptocurrency storage.

In the cryptomarket, everyone should remember the safety rules in order not to give their money to scammers or hackers. You must always be extremely attentive, check the domains of exchanges and crypto wallets that you use.

Choose the crypto exchanges with two-factor authentication and complex unique passwords. Do not store all your cryptocurrency on the exchange platform. Almost all large and protected sites were attacked by hackers. It is best to use hardware wallets, or called storages, which are not connected to the Internet. This option is considered the safest.

If you follow the aforementioned rules when working in the crypto market, you can reduce the risks, although they still will not completely disappear. 

Please share your previous investment mistakes in the comment box below.


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