It can be very exciting to invest in cryptocurrency. This usually results in making mistakes when investing and trading in cryptocurrencies. These mistakes can cost investors a great deal of money. To combat this, we’ve listed a few common mistakes individuals can avoid when investing in cryptocurrency:
Fear of Missing Out (FOMO)
This is a psychological force driving incidents to make impulsive decisions. In cryptocurrency, FOMO lets investors purchase skyrocketing assets hoping they wouldn’t miss out on further gains. The result is an impulsive purchase at a market cycle top leading to losses when prices correct themselves. Let’s take an example, after an individual checks Litecoin price and discovers a hike, in hopes of not missing out on the hike, they conduct a buy without proper strategy or research.
FOMO can also result in crypto scams. Various investors have been scammed into purchasing worthless tokens because they had fears about missing out on the next big cryptocurrency. FOMO can be avoided by having a long-term investment strategy while focusing on building a portfolio instead of short-term gains.
Having No Basic Crypto Knowledge
Many new cryptocurrency investors are attracted by the hype surrounding top cryptologic Bitcoin and Ethereum. However, investors must understand how cryptocurrency and asset class work before they delve into cryptocurrency investment. An investment into an asset not properly understood can be a disaster. Be sure to educate yourself on the goals of several crypto projects to be a better investor.
Storing Crypto in Online Wallets
Since cryptocurrency is a digital currency, it has to be stored in a digital wallet. While digital wallets are convenient, it can be very risky than keeping them offline. Online wallets are prone to hackers who can remove your assets through hacks or scams. A more secure way is storing your assets in an offline hardware wallet with advanced software and hardware encryption for protecting your cryptocurrency’s private keys.
Not Diversifying Your Portfolio
Many new investors only invest in a single cryptocurrency, or even only trade a few coins. This can be risky since a market downturn could turn all the assets into nothing. For example, if Bitcoin drops in value, you might be unlucky if that is the only cryptocurrency you invested in. To resolve this, ensure you have assets in various tokens. When one asset rules value, you can use another to offset the loss.
Overcomplicated Trading Strategy
Many new cryptocurrency investors try to start with complicated trading strategies, maybe because they watched a YouTuber or crypto influencer make large gains. It takes time to learn how the cryptocurrency market works, conditional orders, and technical analysis. Cryptocurrency investment could be simple if you plan to grow your portfolio. Like traditional investing, make research, learn and seek guidance from professionals.
It can be quite intimidating for new investors to sieve through the right cryptocurrencies for investment. Every investor’s goals are different from the other, and not everybody can afford to buy Bitcoin and Ethereum. While you aim at lesser-known cryptocurrency projects, you should use the tips mentioned above to beware of scam projects. Armed with the tips mentioned above, new crypto investors can be more confident in investing.