7 Errors with Crypto Investments and How to Avoid Them
Are you buying and selling cryptocurrencies?
The global cryptocurrency market is $1.49 billion. Its growth rate is undeniable, making it an attractive investment. However, without a proper crypto investment strategy, you’ll likely fail before long.
Don’t let the prospect of failure discourage you.
In this guide, we’ll discuss some common errors with crypto investments. Read on and avoid making them now:
1. Buying High and Selling Low
It’s one of the most common mistakes around. After all, the volatility of the cryptocurrency market puts you at risk whenever you have huge gains. A single miscalculation will lead to your bankruptcy.
It’s almost impossible to have perfect market timing when buying and selling. However, some clear patterns exist. Follow these to make the most out of your investment while keeping losses low.
Some crypto investors buy high because they fear they will miss out. For example, you see a currency increasing in price. You might want to invest, especially when you had similar opportunities before.
Quench your desire to jump in. After all, nothing stays at the top for long. Most early investors will start selling and drag the price down as a result.
On the flip side, it feels disheartening to see your investment decreasing in price. When a currency tanks, it’s tempting to sell before it goes out. However, a solid project has a high chance of bouncing back.
2. Following One-Sided Opinions
What made you decide to invest in cryptocurrencies? Are you using social media platforms as your source of information? Regardless, it’s best to be diverse with your news channels to keep it objective.
For example, follow three YouTube channels and Twitter accounts. Learn as much as you can and draw your conclusions. Never take everything at face value.
A wise investment for one person may not be advantageous to another. Various factors affect the cryptocurrency’s effectiveness. They might have different risk tolerances, entry points, and goals.
3. Lacking a Plan
How much money are you planning to make? How much risk is acceptable to you? These questions are vital since you must answer them before you can make an investment strategy.
The amount you pay for Bitcoin is meaningless if you’re holding it for a long while. After all, it’s almost guaranteed to become more valuable as time passes. There are always better and worse periods for investments, but a long haul means the only way is up.
Meanwhile, low market cap altcoins will likely give huge gains. However, if you invest when the price is too high, you might wait a long time before it recovers.
4. Neglecting Proper Security
Security is often a boring yet critical subject. The crypto market lacks regulations. If anything untoward happens, recovering your crypto investment portfolio is almost impossible.
Fake profiles of various crypto influencers infest all social media platforms. Be wary of scammers, even if they present themselves as admin or tech support accounts. They often offer giveaways or claim they can double your crypto in a few minutes.
When these accounts ask you to send some crypto, block them. It’s obvious, but a lot of people lost their currencies as a result.
Protect your private key, seed phrase, and password. Avoid saving in any digital medium. Instead, use paper writing to keep the information safe.
If you withdraw your crypto, use www.bytefederal.com to locate the safest Bitcoin ATMs around.
5. Never Learning Market Analysis Basics
The cryptocurrency price is often irrelevant. Instead, focus on market capitalization. It’s the asset price multiplied by its supply.
For example, a cryptocurrency is worth $1.50 with a market cap of $50 billion. Its price must increase 60 times before it hits $100 per coin. When it happens, their market cap becomes $3 trillion.
Bitcoin has at least an $846 billion market cap. For this hypothetical crypto to have a $100 value, it must be worth at least 3.5 times than Bitcoin.
6. No Portfolio Control
Controlling your portfolio is tricky since it depends on your goals. If it lacks diversity, you might lose out. At the same time, an overly diverse portfolio spreads your resources too thin.
Are you looking for safe coins for long-term holding? Bitcoin is consistent in the current market. An alternative is Ethereum since it enjoys a similar level of price stability.
Otherwise, investing in riskier low-cap altcoins means avoiding overexposure. Lower your risk by spreading your resources into a few projects. Meanwhile, you’ll get a better return on investment.
7. Investing Money You Can’t Afford to Lose
It’s an obvious mistake, but a lot of people fall for it. As said before, crypto is volatile. The lower the market cap, the more volatile and risky the coin becomes.
Even some safe bets like Bitcoin can decrease in value whenever the market turns. The dip can be as much as 70% within a single year. Altcoins’ value decrease by 90% and may never recover.
A proper expectation is to prepare to hold your coins for three to five years. It allows you to ride out the rough patch. In worst cases, prepare to lose everything when something awry happens.
The amount of money you’ll invest depends on your current financial standing. Your risk tolerance also plays a major role. Regardless, you must familiarize yourself with these risks and consider the worst.
Remember, investing in crypto doesn’t always guarantee money. Having the right expectations allows you to strategize and reduce your risk. It also lessens your stress levels whenever the price fluctuates.
Avoid Errors With Crypto Investments Now
These are some common errors with crypto investments. Never let these mistakes ruin your cryptocurrency portfolio. Use these to guide your journey toward a more fruitful endeavor.
However, learning about crypto investment mistakes is the start. It’s best to enrich your knowledge about blockchain and other related concepts. Stay on top of the trends to make more informed decisions.
Did you find this guide informative? Please consider reading our other posts to expand your knowledge today.