Investing in crypto is not something to be taken lightly. If you really want to make sure that your money will be well-spent, you need to be aware of all the pitfalls involved with digital trading assets like cryptocurrencies. They are, after all, still not as widely accepted as a lot of people may think.
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This illustration photograph taken on July 19, 2021 in Istanbul shows a physical banknote and coin imitations of the Bitcoin crypto currency. (Photo by Ozan KOSE / AFP)
This guide is for the serious future cryptocurrency investor. Here, you will learn about the four worst mistakes you can make and how you can avoid them.
Always Buying When Prices Are Low
It can be a good thing to buy crypto assets when prices are low. But NOT every time. According to the UK Times Money Mentor, low prices are not always bargains due to specific reasons. Sometimes, the value of a specific cryptocurrency drops just because the users-and at times even the creators-have abandoned the project altogether. You just do not know it.
This advice would work well if you want to try new players in the crypto business. A lot of them pop up left and right, but the surefire way to avoid any pitfalls from buying at low prices is to just go for the more established ones. That means either Bitcoin or Ethereum, which are the two biggest cryptocurrencies in the world.
Putting All Of Your Money Into One Asset
Investing in crypto is like investing in stocks in some way. If you put all of your eggs in one basket, you’re playing with fire. Investing in just one coin could make it incredibly tough to balance your losses and gains, especially when other coins are doing far better than the one you’ve invested in, according to the European Business Review.
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Avoiding this is simple: diversify your portfolio. Invest in some other holdings and do not expect one asset to be your only money-maker. Fortunately, it is so much easier to research up-and-comers in the crypto business, so you do not have to fly in blind.
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Believing The ‘Get Rich Quick’ Scheme
A lot of people might think that investing in crypto is a get-rich-quick scheme. In some instances, they’re right. Provided the circumstances are good, a cryptocurrency could go from a few cents in value to several thousands of dollars basically overnight. But that situation is few and far between.
This does not mean that scammers aren’t going to take advantage of that belief, though. Some bad actors will try to artificially inflate the price of a certain coin (usually a small or unknown one) by creating fake buy / sell orders for it. This then drives the price up by leaps and bounds, which will entice novice crypto investors to think they’ll get rich quickly.
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This type of scheme is called “spoofing,” and it promises that you’ll get your investment back tenfold in barely any time. Avoiding this is as simple as understanding that when something seems too good to be true, it often is.
Investing More Money Than You Can Lose
Going “all-in” is never an option if you’re looking at crypto investing as a beginner. It just isn’t. Still, some folks are more than willing to put down literally all the money they do and do not have in a single asset, which is once again asking for trouble. A few of them are even investing money they need to pay for necessities (ie, rent or food) into cryptocurrency, believing that massive returns will come quickly.
Crypto investing is about accepting the fact that you will lose money at some point, given how these digital assets are incredibly volatile. So do not put everything you have into any coin whose value you might think will grow tenfold overnight. Only use your extra disposable income and leave some for yourself so you can, you know, eat.
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Written by RJ Pierce
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