Did you know that bitcoin was initially released in early 2009? Yes, it is not a recent invention. But thanks to Elon Musk and the Pandemic for bringing it to the public’s attention. Today, digital money, also known as cryptocurrency, is the hottest market topic and investment trend.
There are stories about people making outrageous profits through cryptocurrency investment—no wonder both seasoned investors and wannabes are rushing to capitalize on the crypto market. But in greed of making an overnight fortune, they make mistakes and take risks.
The cryptocurrency market is quite volatile. The value of digital currency varies dramatically and unpredictably. If a coin is valued at $10 right now, its value may jump to $100 next week. Therefore, if you decide to buy cryptocurrency, do thorough research and cautious investing.
Five Common Crypto Investment Mistakes
Just like there are examples of crypto making people’s pockets fat, there are also various instances of people losing everything because of crypto. That is because people are investing without knowing what they are doing., which is why they are making the following mistakes.
1. Not Being Up to Date on the Basics
I know you are eager to make quick cash and about to invest money in cryptocurrency, but did you do your homework? If you don’t learn the basics, you will make mistakes and eventually lose.
The purpose of cryptocurrency is to empower people to deal in digital coins without involving trusted authorities, such as banks, governments, or other financial institutions. Hence, there is no need to pay anybody a commission or fee. But the downside is that there are none to ensure the security of your possessions. Only you will be held liable for profit or loss, so invest sensibly.
Likewise, there are several things you should be familiar with before you purchase cryptocurrency, and you can learn them here.
2. Not Planning Strategically
The most common mistake people make is to dive right into crypto trading without a plan. Please don’t make the same mistake, or you’ll be trapped in a never-ending cycle of chasing peak values. Let’s be honest: you don’t have time to sit in front of a computer all day. Therefore, before you go and buy crypto with a credit card, cash, or other methods, you must have a goal, an entrance, and an exit plan in place.
Let me illustrate this with an example. Assume you want to buy Ethereum at the current price of $3,039.13. In this case, your starting position would be determined by your budget. If your budget permits you to buy 1 Ethereum, you will invest $3.039.13 as your entry point. Now, your exit point will be your predetermined goal. Is your goal to make a 30% profit? Then it will be best if you sell when the price of one Ethereum reaches $ 3950.869, which is your exit point.
Similarly, you may plan to convert cryptocurrency (fiat). Fiat currency is a tangible kind of money that we use to carry out transactions. The government issues fiat currency, such as USD, GBP, YEN, etc. Converting your digital tokens to fiat currency can profit you from favorable market trends.
3. Believe to Buy When Price Is Low
Buying only when the price is low is a myth more than a mistake. People assume that when the price of a particular bitcoin drops, it is the best deal and hence an excellent opportunity to invest. You will lose money if you embrace such a mindset. Low prices do not necessarily imply the best bargains. There are several reasons for such a price reduction.
Developers often quit a project halfway through, a nation bans a specific crypto coin, the government changes its fiscal policies, and many other variables influence the crypto price. So, before buying cryptocurrency just because it’s cheap, find out why it’s cheap. If it’s a harmless market fluctuation, purchase the coin; if it’s anything else, don’t.
4. Sending Coins to the Wrong Address
There are no third parties involved in crypto, only the buyer and seller. Hence, there is no customer service or ctrl + Z option to undo the transaction. Since crypto transactions are permanent, you must be cautious and diligent when trading to ensure that the coins do not end up anywhere else.
The most straightforward tactic to avoid this mistake is double-checking an address’s initial digits and letters. If they match the account number you intend to send the coins to, you may proceed. Alternatively, you might send a small amount initially, say $5, and then transact the remaining amount once you are confident.
5. Not Diversifying Crypto Portfolio
I am aware that bitcoin is the most popular and valuable coin. You may be tempted to invest all of your money in it.
But what’s to say it’ll retain its authority and worth in the future? What if another Crypto leap to the top of the charts, or bitcoin gets banned in your country? Therefore, it is advisable to invest your money in several cryptocurrencies. You will not only diversify your portfolio, but you will also avoid losses.
There is no denying that cryptocurrency is the most lucrative investment vehicle. However, one mistake might be disastrous, so you should aim to limit your leeway. Avoiding these mistakes will not ensure that you don’t make any loss, but you will minimize the risk. So be careful if you want to reap the benefits of investing in cryptocurrency.