By the end of 2021, the crypto market stood at $2.17 trillion worth. Yeah, the volume is huge. But it’s also true that cryptocurrency lost significant value in 2022.
Bitcoin went down along with most other crypto coins. This market crash made a lot of investors think if they should continue with their investments. Let me tell you, crypto is the next big thing. And it is here to stay. Take the word of crypto expert Cryptomom for this. In our recent podcast, she talked about the concerns a crypto beginner has.
When it comes to digital currency, be a smart investor from your first day. Don’t make costly mistakes and you are good to go. Now, do you want to know about common crypto mistakes to avoid?
We will touch on that crucial topic in the blog. But first, here is some important information about cryptocurrency.
Popular Cryptocurrencies You Can Invest in
Do you wonder which crypto coins are most popular? And which ones are likely to perform well in the long run? Then here is a quick list for you:
- Bitcoin
- Ethereum
- Solana
- Dogecoin
- Filecoin
- Binance Coin
- The Sandbox
- Tether
- XRP
- Cardano (ADA)
Next, let’s dig into the details about crypto trading mistakes and find out how you can avoid them.
1. Randomly Choosing a Cryptocurrency
One of the most common crypto mistakes is randomly choosing a currency. This happens when you opt for popular coins without doing your research. When a coin is red hot, you may invest a huge amount.
But the thing about crypto is that you don’t invest when the price is high. What if the coin crashes? You will end up losing your investment. Rather, the best bet is to do a financial analysis to determine if a coin is likely to have a good ROI. And if it is here to stay. Then you can invest when the price is low.
If your financial analysis was accurate, the prices will shoot up after some time. This is when you can enjoy huge returns on crypto coins you bought for a lower price.
2. Lack of Careful Planning
Another mistake crypto noobs make is to start investing without a careful plan. An effective strategy can help you make profitable investments. Also, it reduces the risk if you have a straightforward plan.
Why do I want to invest in cryptocurrency?
Do I want to invest long-term or short-term?
How much risk I can accept?
Do I want regular profits? Or do I plan to completely cash it out at the end of a specific period?
Which crypto exchange would I use?
Without a clear strategy, you won’t know what does a good investment look like. Also, you won’t be sure about your investment goals and when you would earn profits.
Don’t dive into cryptocurrency just because it has been all the hype for the past few years. Don’t fall prey to FOMO and come up with a strategy or plan. So, begin your journey by learning about Blockchain technology and crypto lingo.
3. Believing Everything You Read Online
You can find some useful tips about crypto in the digital world. But crypto noobs tend to believe everything they read online. It can be a dangerous mistake. So, add it to the list of crypto mistakes to avoid.
Not every post you find online is reliable. Thus, it’d be a big mistake to blindly trust everyone who self-declares themselves a crypto expert.
There are many genuine crypto experts who want to help beginners. But in some cases, fake gurus or influencers who post online have no idea what they are talking about. They may create fake posts to bring traffic to their website without actually knowing anything about crypto.
So, choose wisely who you should trust. Conduct research about the crypto expert you follow. Also, make sure they are knowledgeable about the industry and talk with experience. Genuine influencers can guide you in the right direction and help you make profitable decisions.
4. Not Diversifying Your Crypto Portfolio
Do you know why some crypto investors fail? It’s because they put all their eggs in the same basket. Yes, we are talking about portfolio diversity.
It’s a prevalent mistake to choose a digital currency. Don’t invest all your money in the selected currency in hopes of high returns. This decision can indeed yield higher profits if its value significantly increases down the road. But don’t forget that crypto is volatile.
So, what would happen if things don’t go as per your plan? Then your investment may result in huge losses.
The best decision is to diversify your portfolio. Play safe and invest in a number of digital currencies with good projection. This approach will secure your investment and increase your earning potential.
Also, it is suitable for reducing the risk. Diverse investment decisions can reduce the risk factor and increase the ROI.
Overdiversification
Just as lack of diversification is a mistake, overdiversification is also the wrong choice.
There are a huge number of coins out there. You may invest in a large number of coins to gain from those whose value significantly increases in the future. But what happens is that you end up with a large number of low-performing assets. As a result, your profit potential decreases.
So, invest in currencies after proper research.
5. Expecting Immediate Results
Crypto trading isn’t as easy as it seems. Don’t think of this financial avenue as easy money. Similarly, don’t be in a rush after investing in crypto coins.
One of the important crypto mistakes to avoid is to expect immediate results.
If you’re in the game for quickly getting rich, then it may be a lost cause for you. The value of crypto is currently low. Due to high volatility, we can’t be sure when it will go up. But what’s certain is that it will increase slowly.
There’s no denying that crypto is the currency of the future and it’s here to stay. So, create long-term goals and invest accordingly. It has the potential to increase your profits and build financial assets. But for that to happen, you need to wait. You can achieve your goals in 2-3 years or more with strategic investments.
6. Not Being Cautious of Scammers
The digital environment certainly adds value to users. The option of investing in digital assets is one such benefit. But it brings along its unique set of challenges. Privacy concerns and scams top the list of risk factors for crypto beginners.
Fake or Malicious Wallets
Crypto wallets are where you store your cryptocurrency. You can use this amount for exchanges, withdrawals, or buying other assets. Exodus, Coinbase, and Ledger are among reliable names. But there is a wide range of suspicious wallets online.
These scammers may steal your valuable cryptocurrency.
Fake Coins
Similarly, fake crypto coins are a major headache for investors. A huge number of genuine coins are available for interested people. You can buy and sell them with ease.
But criminals use fake coins to steal your private information. They may commit identity theft or steal your hard-earned crypto when you invest in those fake coins.
Free Money Scams
In 2020, hackers gained control of many well-known personalities. They claimed that whoever sends $1,000 to a specific wallet will receive double the amount. This tweet captured attention since Twitter users believed the post was actually created by Elon Musk and other high-profile people. As a result, crypto investors lost $121,000 in a day or two.
As a crypto investor, be extra cautious of such schemes. Don’t believe everyone who offers to give you free money. Instead, do ample research and invest in genuine crypto coins.
Final Thoughts on Crypto Mistakes to Avoid
Crypto and digital currency can be profitable long-term avenues. But you need a clear roadmap with a proven strategy to make your journey worth it.
So, do your research, learn about the industry, and follow genuine influencers to make the right decisions.