The popularity of cryptocurrencies seems to be constantly on the rise. With more and more people investing in Bitcoin and other cryptocurrencies, you might feel like giving it a go as well. However, before you invest in any cryptocurrency, it’s important that you calculate all the risks.
If you’re new to the world of cryptocurrencies, you’re likely to make a few mistakes. But these days, any mistake may cost you big time, as prices of cryptocurrencies are volatile.
In this post, we’ll introduce you to the cryptocurrency investment mistakes to avoid so that your journey as an investor starts with a positive foot forward. So, without further ado, let’s get the list of mistakes started!
1. Failure to diversify
People who have hit gold in cryptocurrencies often make it seem like something that anyone can pull off. However, it doesn’t work like that. While you might hit gold after getting lucky, you may also lose it all if you’re taking a gamble.
Diversification is an important thing for cryptocurrency investors in today’s times. When you diversify, you give yourself the best chance of making up your losses with some wins. After all, losing some is better than losing it all, right?
2. Not Doing your Research
Such is the hype surrounding Bitcoin and other cryptocurrencies that a lot of people want to take the plunge before doing any research. The worst thing about such investors is that they’re convinced that investing in cryptocurrencies is going to reap them high rewards.
That said, if you want to truly make the most of the opportunities that the cryptocurrency market has, you’ve got to know what you’re getting into. Track emerging crypto trends; pay attention to the market dynamics; learn from the experts on how to invest and/or trade the market in the right way. In other word, DYOR – Do Your Own Research.
There are tons of resources online that can help you understand the basics. Once you know the potential risks and benefits, you’ll be somewhat ready to invest.
3. You Overtrade
In the world of cryptocurrencies, more trades don’t translate into more rewards. More often than not, trading more or overtrading leads to a taxed out brain that’s incapable of making correct decisions.
The best thing to do in terms of trading frequency is to look for the right trading opportunities. Again, this is something that you’ll only learn from experience. But when starting out, it’s vital that you don’t overtrade.
4. Paying Too Much Attention to Low Prices
While Bitcoin and Ethereum are two of the most expensive cryptocurrencies out there, there are many options that investors can trade in for significantly cheaper prices. However, paying too much attention to low prices of certain cryptocurrencies isn’t ideal. Remember, the value of a cryptocurrency depends on factors such as volume and demand.
Many cryptocurrencies have come and gone, and the pattern will continue. Simply put, you can’t pin your hopes on a low-priced cryptocurrency thinking that it will blow up in the future.
5. Falling for Scams
Scams are not new in the cryptocurrency world and primarily, they target novice investors who have unrealistic expectations. For example, there are many pyramid schemes that claim to reward investors based on the number of investors they can add to the pyramid. While some schemes certainly are genuine, others are out-and-out scams. However, for someone new to the cryptocurrency market, both the genuine and the fake schemes may look the same. This is where research comes into the picture.
Before parting with your hard-earned money, be sure that you verify the authenticity of the schemes and the ones running them.
6. Speculative Buying
The cryptocurrency boom has taken the world by storm. However, it has also led to a lot of speculative buying, which has more often than not resulted in losses for investors. Simply put, the cryptocurrency market is incredibly volatile and prone to overnight fluctuations.
So, if you want to buy a certain cryptocurrency, let market research be your foundation – not speculation. Even if a cryptocurrency’s value is soaring, find out concrete information regarding the factors that are driving its growth instead of investing straightaway.
To Conclude…
So, there you have it! 6 of the most common mistakes that beginner investors make in the cryptocurrency market. All in all, we recommend taking calculated risks after having conducted thorough market research.
When it comes to cryptocurrencies, trust your head and not your heart. That way, even if you incur losses, they won’t put you out of business.
Cover photo credit: Andrea Piacquadio / Pexels
