In a research accomplished in January 2021, Crypto.com projected that about 106 million individuals use cryptocurrency throughout the world. It cannot be helped that an increasing number of baby boomers and Gen Xers are interested in Bitcoin and other cryptocurrencies.
As more investors enter the market, the value of cryptocurrency continues to rise. However, crypto investing, like any other type of investment, has its own set of concerns. With this many people hopping into the cryptocurrency craze, unfortunately, a lot of them have also experienced challenges that might have either lost them a great amount of money or gotten discouraged.
Cryptocurrency may be difficult to understand, especially for newcomers. If you wish to learn to trade or invest in cryptocurrencies, it will be a great help to be aware of the most common mistakes many cryptocurrency investors make.
In this article, you will learn about six common crypto investment blunders that everyone should avoid.
First: Lacking of a well-thought plan
When it comes to investing in and trading cryptocurrencies, the worst thing a crypto enthusiast can do is not prepare ahead. We should be practically reminded that generating profit in the crypto market is not an easy endeavour for a beginner. Doing your homework on researching crypto-assets you are considering investing in is crucial in making your plan.
Before making any decisions, you must be strategic and have clear goals. When you do not know where you want to go, the possibilities of financial loss are considerably higher. As a result, you must first establish your objectives and ambitions before entering the crypto market and earning from digital assets.
Second: Investing in fake cryptocurrencies is a risky business
Creating phoney websites and mobile applications that look like initial coin offerings (ICOs) and ask consumers to put money in a hacked wallet is one of the common frauds in the crypto industry. When a person is provided with an account to fund their wallet or accept payments, they are just shifting money to a hacker-controlled site. In most cases, scam exchanges entice customers with celebrity endorsements, unwanted phone calls, or emails promising huge returns on investment.
The most popular piece of advice for cryptocurrency investors is to only use well-known and reputable cryptocurrency exchanges. Before you create an account, do some research and see if other users or renowned experts in the crypto industry can attest to its validity.
Third: Panic-selling coins
According to the survey conducted by CryptoVantage, the most prevalent error committed by investors was panic selling coins. The price of Bitcoin fluctuates a lot, which might lead to this sort of behaviour. 38% of investors sold in a panic and afterwards regretted their decision.
Panic-selling happens when people are more likely to sell their cryptocurrency holdings because they are more afraid of losing money than they are of making money. Furthermore, some people spend money in the hopes of earning two weeks later. Regrettably, this is not the case. To avoid this, do not be highly reactive to your emotions but instead develop long-term thinking.
Fourth: Lacking of portfolio diversification
While Bitcoin is now on a bull run, it may yet fall and cause massive losses at any time. When you focus on investing in one coin, you increase your chance of losing money because if the financial market is disrupted, you will not be able to recoup your money. To avoid this mistake, you should diversify your digital assets. Diversification is important in any investment, and cryptocurrency is no exception.
You can divide the funds across several asset classes, including Bitcoin, Ethereum, Tether, and other potential altcoins. There are many choices in the crypto market, but potential investors should evaluate the prospects based on their profile before proceeding.
Fifth: Having insufficient security
If there is one error that rookie crypto investors make, it is believing that a digital currency’s encrypted nature is enough to keep it secure. Encryption does not imply safety. Cryptocurrencies are secure because they are encrypted, but that does not mean they cannot be hacked or stolen.
Having full control of your virtual money has drawbacks, so safeguard your private key, password, and seed phrase at all times. It is better not to save them to your computer, phone, email, or cloud storage. Instead, jot down these important details on paper and keep them safe. You can also have a copy in another secure location as much as possible.
Sixth: Forgetting password
Investors who had forgotten their passwords were likewise a recurrent issue. As the popularity of cryptocurrency rises, crypto recovery services are becoming more popular. People who owned cryptocurrency when it was worth close to nothing frequently forgot their passwords at some time. Fortunately, that is where the recovery services can help.
It is critical to plan ahead of time how you will save your password before you start trading. Just like in the fifth case, the first step is to write it down on a piece of paper, but even that has its risks because it might be stolen and used by someone else. Be cautious about where you save your password.
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