Crypto is all the rage at the moment, attracting both experienced investors and newbies with some money to spare. However, before you invest money in cryptocurrencies, you should be aware that these digital assets are highly volatile, and entering into the venture unprepared can result in significant financial losses on New Crypto Traders.
The 6 common mistakes mentioned in this post will help you to better understand the crypto market and make sure you avoid them as a New Crypto Traders .
Table of Contents
1. Not Conducting Research- New Crypto Traders
Crypto trading must be carried out with great care as it might give great results but it can also bring massive losses. As a result, you need to conduct thorough research before placing any order in cryptocurrencies.
Instead of being influenced by people who claim to be making phenomenal returns on the latest cryptocurrency, try to get some knowledge of how the crypto market works, as well as the coin you’re considering buying yourself.
2. Investing in One Cryptocurrency
Many people decide to invest all their money in a single cryptocurrency like Ethereum or Bitcoin. However, putting all your eggs in one basket is not smart because you’re going to be at the mercy of that one cryptocurrency. On the other hand, if you have several currencies and one does not do as well as the others, you’ll be able to balance out any losses.
As of March 2022, there are more than 18k cryptocurrencies in existence. The digital currency list is long and includes coins like Solana, Cardano, Polkadot, Litecoin, Tron, etc. And although many cryptocurrencies have little to no trading volume, some enjoy great popularity among dedicated investors.
3. Investing Money You Can’t Afford to Lose
Investing the money you need to pay rent or bills is not a good idea because if the coin’s value drops after you buy it, you will be left with nothing.
As mentioned before, the crypto market is highly volatile and you can never know when a coin’s value will increase or drop. For instance, in 2018, the price of Bitcoin fell by about 65% After an unprecedented boom in 2017. That’s why it is best to play safe and only invest money that you can afford to lose. Experts suggest that investors who are interested in crypto should have between 1% and 5% of their net worth in it.
4. Falling for Scams
It’s not easy to separate genuine crypto recommendations from frauds and scams. According to reports, cryptocurrency investment scams increased to over 7,100 in 2021, which is up 30% compared to 2020.
So when you are confronted with information about cryptocurrencies, take a step back to look critically at the coin in question. Check how many users it has and be sure to avoid coins that promise huge earnings but haven’t delivered anything tangible.
5. Using the Wrong Crypto Exchange
Besides affecting your profit, choosing the wrong crypto exchange puts you at risk of losing your entire cryptocurrency holdings. That’s why you need to make sure the exchange you decide to use is secure and reputable.
Start by checking out the reviews about the exchange online. Look for an exchange with good liquidity, trading volume, and trust score. In addition, don’t forget to check the exchange’s trading fee. In order to avoid a significant portion of your trading profits being depleted, opt for an exchange with low trading fees. Finally, choose a crypto exchange that’s user-friendly to ensure effective trading.
6. Forgetting Your Keyphrase
According to The New York Times, about $140 billion in Bitcoin has not been claimed by owners because they are unable to remember their passwords. The cryptocurrency data firm Chainalysis confirms this, stating that about 20% of the 18.6 billion Bitcoin mined in total is lost in wallets that have seen no movements in years.
If you have a hardware wallet for storing your crypto offline, forgetting your password will make all your crypto holdings irretrievable.
Crypto trading needs to be carried out with great care as it might give great results but also bring massive losses. Extensive research is a must before placing any order in cryptocurrencies. As long as you don’t fall for the hype surrounding cryptocurrencies and keep following the six basic principles listed in this article, cryptocurrency trading can be an excellent opportunity for financial gain.