It is pretty easy to become a crypto investor – some cryptos are worth a penny, so it’s enough to have a couple of dollars, a smartphone or tablet, and you’re off to a good start! However, the imaginary ease of entry often leads to serious mistakes and a quick loss of capital.
We have listed some of the most common mistakes new investors make and how to avoid them.
9 Mistakes to Avoid in Crypto Investment
Mistake #1: Reluctance to Independently Study the Issue
Unverified predictions, which are full on the Internet, are often nothing more than someone’s fantasies and conjectures. Otherwise, we would all become financially secure for the rest of our lives.
A thing to do: Do not trust questionable information. DYOR – Do your own research based on relevant and verified data.
Mistake #2: Not Having a Working Strategy
A very common misconception is that what worked for someone else will also work for you. But whoops! Investing in crypto is a bit more complicated, and you can’t get away with copying after others if you really want to succeed in this business. An investment strategy is just one of the bricks in the general building of the crypto industry, and you need to know where and when to put it.
A thing to do: Pay attention to the market itself, a specific area and the industry as a whole. To do this, you need to study the issue, dive into it entirely, and apply only those strategies that work today, because tomorrow everything can change drastically.
Mistake #3: Emotional Decision Making
Many crypto assets are nothing more than hyped soap bubbles that promise nothing good but to burst and take the money of investors who believe in their success. It is unlikely that you want to be one of those ill-fated ones.
A thing to do: Don’t invest in crypto just because your favorite actor tweeted some nice things about it. Always make buying or selling decisions with a cool head. Also, do not rush into decisions by watching the market situation and events in the crypto industry. For the crypto market, such unrest is a normal phenomenon. So keep calm and move on.
Mistake #4: Investing All Your Capital in One Coin
It’s quite a common mistake to invest in Bitcoin or Ethereum only. These cryptocurrencies are time-tested and reliable, but even seemingly stable assets fail or do not give enough profit. Therefore, with this approach, you risk losing everything.
A thing to do: Diversify. Swap some of your BTC to XRM, ADA, USDT, DOGE or other promising coins. There are so many fish in the crypto sea! But do it systematically, in the right proportions and volumes, and not haphazardly. There are many effective strategies for how to correctly allocate assets in your portfolio. Choose the one that best suits your financial goals and market conditions.
Mistake #5: Diversifying Your Portfolio Too Much
Variety is great, but there is a limit to everything. You can’t keep track of lots of coins efficiently. Plus, you don’t get much benefit from this approach.
A thing to do: Do not overload your portfolio with different coins. It is optimal to have not more than 7-12 different assets.
Mistake #6: Risking More Than You Can Afford to Lose
In cryptocurrency trading, people declare the ideas of making money, changing lives, and choosing the right moment. As a result, they go broke, risking all their assets, getting into debts and loans, and selling off cash property. They simply forget that crypto investment is actually a lottery with a high probability of losing.
A thing to do: Invest as much as you are not afraid to lose. Before confirming a trade, imagine that you are losing all the money that you convert into crypto, and if you do not have the desire to die at this thought, go ahead.
Mistake #7: Keeping Investments on a Crypto Exchange
If the money is not in your wallet, it is not your money. Although at a high price, the collapse of the FTX crypto exchange taught a good lesson to those who kept their assets on the network. In just a week, one of the most respected and reliable exchanges has turned into a bankrupt company that has lost over $8 billion of its clients’ money.
A thing to do: Keep your crypto in secure crypto wallets, preferably in hardware ones. Use crypto exchanges only to buy assets.
Mistake #8: High Expectations
More expectations means more disappointment. Becoming a millionaire in one day is unrealistic. Therefore, high expectations only hinder work.
A thing to do: Set high expectations aside so they don’t get in the way of focusing on the things that really matter. Aim for about 20-30% per year. This is a great indicator even for experienced investors. Therefore, it is worth following the intended strategy, without being distracted by the desire to get rich quickly.
Mistake #9: Lack of knowledge of fundamental, technical, social and on-chain analysis
Investing is about the ability to give a competent assessment of probabilities, where there are no absolutely positive or negative expectations. Lack of understanding of how things work contributes to making one mistake after another.
A thing to do: Invest not only in crypto, but in knowledge as well. It is important to be more informed and aware than your competitors.
Skill Comes with Experience
Making mistakes is okay, moreover, it’s the only way to grow professionally and get feedback from the reality around us. The main thing is not to commit the same wrong actions over and over again, while hoping for a positive result.
Ideally, this article will help newbies:
- avoid making common mistakes;
- start to better navigate the world of blockchain technologies;
- develop an individual strategy for investing in cryptocurrencies.
If you suddenly find that half or even most of this list of errors is familiar to you firsthand, you should not consider this a failure. On the contrary, you will only become richer if you are able to correctly use the tips from both your own personal experience and expert advice.