Cryptocurrency trading is more popular than ever these days. As more people enter the industry, it becomes increasingly important to avoid common mistakes that can cause unnecessary losses. Unfortunately, some of these mistakes are easier to make than others. Let’s look at some of the most common mistakes crypto beginners make that you should do your best to avoid.
1) Denial of Risk
One of the biggest mistakes beginners make is failing to recognize and understand the risks involved with investing. Even experienced investors forget that there are no guaranteed profits in this or any other industry. Some people even invest money they can’t afford to lose. You need to remember that even with some of the most established cryptocurrencies, there’s always a risk. Look at what direction the Cronos price prediction pointed towards in spring 2021 versus what the consensus on the coin’s future is now. You’ll see one example of the dynamic nature of cryptocurrency in recent times.
You should take a long and serious look at your finances before investing. If you don’t have enough money to cover your initial investment and an unplanned financial emergency, you probably shouldn’t be investing in the first place. It’s also good practice never to invest more than you can afford to lose without damaging your overall quality of life.
2) Not Diversifying Your Investments
Cryptocurrencies are notoriously volatile and require considerable caution when investing because the market is dynamic on a large scale. If you have a large amount of your investment portfolio in cryptocurrency and it suddenly crashes, you could lose a large chunk of your savings.
It’s important to remember that putting all of your eggs in one basket is never a good investment strategy. However, investing in several different types of altcoins can help provide some protection against losing everything due to one single crash.
3) Not Fully Researching the Coins You Invest In
Many cryptocurrencies are scam coins designed to lure unwitting investors into throwing away their money on something that isn’t backed by anything other than slick marketing. However, if you only invest in coins with a strong team behind them and a real use case, you’ll have a much better chance of getting your money back if the coin crashes on launch.
While spending time researching cryptocurrency before investing, it’s also important to remember that the information you find on these coins can be unreliable. If the information you get from a coin’s website or social media channels doesn’t check out, it’s best to move on to another coin.
4) Going Too Deep Too Soon
Many new crypto investors think they have to make a significant investment from the very start to stand a chance of making money. Unfortunately, this is not true, and if you try to throw in a large lump sum on your first investment, you will take unnecessary risks.
It’s much better to practice starting small and work your way up over time. For example, if you start with a small investment, you can experiment with different coins and figure out which ones you like the most without risking severe losses.
5) Not Finding Altcoin Profits to Invest In
A lot of altcoin investment projects are indeed scams, but there are some which genuinely offer legitimate solutions to real problems. Investing in these altcoins can convert any losses you incur on your initial investment into profits. This is a great way to increase your overall portfolio and make money over time. It’s also a great way to turn a small amount of money into an enormous profit if the altcoin does end up paying out better returns than expected.
If you’ve decided to invest in altcoins, be sure to do your research before investing. Try finding altcoins that have already either been fully launched or already have a tremendous amount of hype surrounding them. This can give you an extreme advantage over your more cautious peers and provide a much better chance of making money than investing in the most hyped-up ICOs out there.
6) Not Building a Portfolio
It’s essential to build a diversified crypto portfolio with several different altcoins and coins rather than just one. If you invest all of your money into one coin or ICO, it will be difficult for you to recover if they fail. By spreading your money, you’ll be able to keep yourself from losing a significant amount of money in the event of a crash.
It’s also a good idea to have some other coins you can sell at a profit if the price rises significantly. This will allow you to turn your initial investment into more money over time. In addition, it’s always good practice to invest in coins that are going nowhere and only intend to increase in value over time. For example, Altcoins will never go up by, say, 500% unless they were made to go up by 50% or more.
7) Not Using a Genuine Trading Platform
It’s great to be able to buy and sell coins directly from an exchange, but it’s also crucial that you only invest in projects that you can trade for actual money. Some sites allow you to purchase crypto with USD or other fiat currencies without transferring your funds in person. In addition, they’ll also allow you to trade your altcoins for other altcoins at a highly liquid rate on their platform. It’s finding them and doing your research that’ll save you.
The downside is that the average person doesn’t truly understand how exchanges work nor how cryptocurrencies work as a whole. You can get scammed easily in the case of a market crash and lose money by falling for a pump fake. An exchange should be used only by those who are highly confident in their trading skills and understand the risks of buying a cryptocurrency.
8) Not Planning For Retirement
Cryptocurrencies like Bitcoin aren’t going anywhere anytime soon, and there’s a good chance that they will be around to impact your retirement at some point. The price of Bitcoin has fallen significantly, but this doesn’t mean it won’t continue to rise again shortly. If you have plenty of other altcoins set up as well, you’ll be able to take advantage of this phenomenon if it occurs again. If you’re not planning to work in crypto trading actively, you can still take advantage of the shift in the market by converting your current funds into altcoins and holding them until they double in value.
There’s a lot of money to be made in the world of cryptocurrency. If you commit yourself to learn how it works and how to set up a successful cryptocurrency portfolio, you can earn a pretty penny over the long term. Just be sure not to take a lot of risks while investing, and you’ll be able to maximize your profit and turn it into meaningful wealth over time.