Although cryptocurrencies entered their peak quite a long time ago, and it seems that a lot is known about them, newcomers still make many mistakes. Sometimes they lead to regrettable consequences, specifically to losing money. We are very bitter to see how users are left with nothing instead of profiting from digital currencies.
To help you avoid this, we have prepared today’s article. In it, we will discuss the most common mistakes that newcomers who enter the world of cryptocurrencies make and explain how to avoid them.
Lack of Own Market Research
Today, there are many sites that publish information about various cryptocurrencies. And this is good because users get a huge field for research. However, not all novice investors actually do them. Many of them find it a great option to read the opinion of some expert on one of the many platforms and follow his advice. However, this is a serious mistake that can lead to bad consequences. Many authors are simply paid to start a hype around some cryptocurrency. Sometimes so-called experts don’t know anything about investing at all but just try to make money from their views.
We advise you to do your own research and analysis. For this purpose, choose several sites where actual information about cryptocurrency projects and funds is published. One of the best is ChainBroker because you can always find fresh updates there. Read the news, find patterns, and you will pretty quickly become an expert yourself.
FOMO
Not all newcomers know what this abbreviation means. Behind it hides the fear of missing out on profits, which can lead to unfortunate consequences. This feeling is familiar to many traders, and no wonder: it’s hard to stay calm when the market is turbulent around. In this case, it is worth taking a deep breath and analyzing the situation. Here are some useful tips:
- Answer yourself the question of why you want to buy or sell cryptocurrency. Is your desire dictated by sober analysis, or are you just listening to the opinions of others?
- Set trading rules that you will not violate in any way. These rules include, for example, setting stop-loss and take-profit.
No Diversification of the Portfolio
This is probably one of the biggest mistakes most beginners make. They believe that they can make money on just one cryptocurrency, and they end up losing everything. Think logically, what is likely to happen: the depreciation of one cryptocurrency or everything on the market? Of course, the first option is much more probable to occur.
Experts consider that it is better to invest most of your capital in stablecoins, such as BTC or ETH. A smaller portion should be allocated to leading altcoins (DASH, XMR). The smallest part should be invested in promising new coins. We agree with this advice because that way, in the best case, you can make money on every investment, and in the worst case, you will lose only a small part of your capital.
Analysis of Prices Only
Of course, price is what determines the value of digital currencies to a large extent. However, thinking that it is the only thing that matters risks losing capital in the long run. There are other things to consider when choosing assets:
- The technology that the project is based on.
- Information about the developers and the team.
- The possibility of working for the long term.
- Data about the project partners.
Only after you can get all this information and you like it should you invest in digital currency. Otherwise, there is a great risk that it will soon cease to exist, and you will lose quite a large sum.
Forgetting Cyber Security
Let’s imagine that you have done all the necessary research and selected a good option for investment. What could cause you to fail? Of course, cybersecurity issues. When choosing an exchanger, make sure that it meets the specified criteria:
- Availability of 2FA, thanks to which your password will not fall into the hands of fraudsters.
- Allocate most resources to cold storage.
- Multilevel security system, which the developers are constantly improving.
- Availability of all data on the developers of the project and their location.
Also, before you invest, familiarize yourself with the main fraud schemes. They can be different because, along with the improvement of security, the scammers are also improving. Don’t talk loudly about your investments in front of strangers, don’t give your passwords to anyone, and don’t click on links sent to you by strangers.
Investing Money You Cannot Afford to Lose.
Cryptocurrency experts, brokers, and exchanges warn us about this. Unfortunately, not all users follow this simple advice. You should remember that the digital currency market is volatile, which means that the risk of losing money is high even with a perfectly chosen strategy. Even if you have chosen fairly safe tokens like BTC, it does not mean that you are safe at all. Such cryptocurrencies can also collapse by 70-80% in an instant (this is exactly what happened to BTC in 2017). This is the reason for the advice not to invest more than you are willing to lose.
Closing Thoughts
We cannot guarantee that all of the transactions you make will be profitable. However, if you can avoid the mistakes that we described in the article, you will significantly reduce the risks for yourself. We wish you success in the difficult industry of crypto investing. We are sure that you will succeed!
