By John Ajayi on The Capital
With paper money losing value by the day, you want to put your money where it will have some worth. One of the profitable ways to do this is to invest in cryptocurrencies such as Bitcoin and Etherum. As much as a lot of people make big from this, there are a lot of mistakes new cryptocurrency investors make.
Cryptocurrency investors who got it right fast and early made millions from their investments. Considering the rate of new investors, it is highly unlikely you will make it that fast. However, there is still an awful lot of money to be made.
Truthfully, there are a couple of mistakes new cryptocurrency investors make that affect their investments. Basically, most new investors don’t know what they are doing and as a result, make some errors. Most of the mistakes new cryptocurrency investors make can easily be avoided.
Investing in the right crypto at the right time doesn’t only involve luck but, more importantly, insights and precision. Only those who improve their investment practices every day excel at investing in cryptocurrencies. If you’re going to invest in the best cryptocurrencies out there, you must learn from the mistakes new cryptocurrency investors make.
When investing in cryptocurrency, some slipups can be incredibly damaging to the sustainability of your portfolio. With this in mind, here are the 11 biggest mistakes new cryptocurrency investors make.
You don’t understand the Technology
This is the classic “If you rush in, you will rush out” saying. First and foremost, get as much knowledge as you can on investing in cryptocurrency. If you don’t understand the basics of the technology, the road will be risky. Until you can judge projects for yourself, you will be missing out on big opportunities.
Not Reading Cryptocurrency Charts
Get to grips with the market you are trading in — learn as much as you can at the outset then expand your knowledge as you progress. In the cryptocurrency world, the expression “Knowledge is power” has never been more accurate.
Understand the price charts, know where your investment window is, and then use historic information alongside your carefully sought out projections. Follow these patterns and your cryptocurrency investment life will be very lucrative.
This is particularly a mistake new cryptocurrency investors make. Some investors want to make as much as 20 trades a day. This is dangerous. Ultimately, many of them lose from fees or because they made bad trades and then trade more to recover losses.
The reality is that trading too much leads to poor decision making and increased trading fees.
Using the wrong exchange
This is common with new cryptocurrency investors. Many investors choose an exchange without first reading up on the fees or practices of that exchange. Some of the largest and most popular crypto exchanges also have the highest fees.
High fees mean lower profit margins, and as an investor, you want to be seeking out low-fee secure exchanges to make your portfolio more profitable. With high fees, your investment will have to grow further for you to sell at a profit. Making sure that you’re using the best exchange platform is vital.
You Fall for the Hype.
Social media has a big impact on cryptocurrency trading and investing. So, it is no wonder that investors and crypto creators do their utmost to hype up a token. This happened a lot during the 2018 crypto crash and still has an impact on investors to this day.
When using social media be wary of information that appears to be too appealing. Articles with heading such as “Bitcoin made me a Millionaire,” “Etherum is going to Rocket in Value” are often misleading. I’m not saying cryptocurrency can’t make you millions or that Etherum won’t increase in value. But more often than not, media hype causes a bubble in investment that makes a cryptocurrency jump in value.
As a result, the long-term investors sell to make a huge profit, leaving other investors with a stock that isn’t going to be profitable. This hype caused many fortunes to be made when Bitcoin surged in 2017. For those who hadn’t sold before the bubble burst, this caused financial misery.
You should also be wary of the new crypto tokens that seem to be the latest craze. Again this hype will likely push up the value and it may be considered an attractive investment prospect. Oftentimes when the dust settles, it turns out not to be.
The best thing to do to combat hype is to familiarize yourself with the crypto world by reading expert blogs as well as information available online. This will allow you to invest in cryptocurrencies that you fully understand and help you make informed investment choices.
Falling for Scams
There are a lot of scams out there that prey on new cryptocurrency investors that don’t really know what they’re doing. It is important you learn how to avoid them. Never put your money into a site before doing your research because there is a high chance it’s a scam. It is highly likely you will never see any token in return.
Pyramid schemes have also plagued the cryptocurrency world, so be aware of any site that asks you to recruit new investors in exchange for cryptocurrency. Phishing emails that appear to be from your wallet provider are common as well so be careful before you click any links.
You Chase Cheap Coins
Never forget that the price of a coin does not affect its potential growth. Don’t chase cheap coins with dreams of making millions. Lots of uneducated investors in the crypto space buy low priced cryptocurrencies because they think there is a higher chance of big returns.
A better factor to consider when looking for gems is the market capitalization. The market cap is a better indication of a coin’s value. You can check the 10 best cryptocurrencies out there currently to avoid making a wrong purchase.
Buying During a Spike
When the value of a cryptocurrency is shooting up, many new investors assume that it will continue to grow. They invest a lot of money which usually leads to an unfortunate loss. They often end up buying at the top of a peak before the value starts to dip again and they make big losses.
It’s common for cryptocurrencies to see an artificial spike that soon corrects itself. It is important that you don’t get caught up and buy during this spike because you will severely lose money. Spend some time learning how the market operates and what the trends are before you start investing. This is a certain way to avoid this mistake.
Security is crucial for sustainable cryptocurrency investment. A new investor should consider investing in hardware wallets to keep your investments away from thieves and hackers. A recurring problem is investors trusting “Exchange Wallets” and simply keeping their assets within the exchanges.
Although some reputable exchanges have a long-standing reputation for protecting investor funds, the online platform is never so airtight. They can still be exploited; hackers are always looking to do this. Transfer your cryptocurrency funds into your secure hardware wallet and only plug it in when you need to transact.
Emotional investing is a common mistake new cryptocurrency investors make. This simply means making rash decisions that are not based on the facts. Bitcoin, for instance, is very volatile and the value often goes up and down a lot.
It’s important you don’t panic and sell all of your Bitcoin because you have noticed a small dip that will likely correct itself in a few days. Emotional investing is one of the easiest ways to lose all of your money, so it’s important that you evade it.
Short Buying and Selling
Most persons who made a lot of money from Bitcoin were investors who held on to coins for a long time and sold off at a higher value. Cryptocurrency can be very turbulent and prices change drastically in short time frames. This is due to many investors buying and selling in short spurts before moving onto another coin and doing the same.
Diversify your trading options and look at long-term growth projections to make the most of your investment. Short trading is a fantastic tool as part of a wider arsenal, but you should also actively explore long trade potential.
The cryptocurrency market attracts a lot of amateur investors. This means that a lot of people sell very quickly because they get jittery over fluctuation in the price. As an educated and seasoned investor, you will want to look for signs that indicate whether it is the right time to buy or sell. After that, stick with your overall knowledge to trade effectively.
To conclude, trading in a position of knowledge, scrutiny, and security and having a diverse investment plan will yield the best long term outcomes. A potential investor must know the best cryptocurrency to trade in this year as well as the other viable options. As long as you can avoid these mistakes, you will be more successful with your cryptocurrency investment journey.
Originally published on Woken Living
11 Biggest Mistakes New Cryptocurrency Investors Make was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
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