As of 2021, about 46 million Americans owned a share of bitcoin, among the fastest developing crypto. Investors explore blockchain in the hope of making a fortune in the fast-paced market. When investing in blockchain, beware of common crypto investing errors that cause losses.
Although investing in cryptocurrencies is quite the gamble, it can be lucrative and make you a fortune. It, however, calls for bold resolve and a level head to invest in coins that can offer returns. You otherwise risk losing money if you think it’s an easy get-rich-quick scheme.
If you’ve decided to try your luck in cryptocurrencies, avoid the common investing errors. Knowing what to look out for can help you avoid pitfalls in your investment journey. The highly volatile markets can be murky waters for most beginners since it requires material skills.
Wondering what could go wrong with crypto investing? Here’s a list of the ten common crypto investing errors and how to avoid them.
1. Not Diversifying Your Crypto Portfolio
It might sound cliché, but you shouldn’t put all your eggs in one basket. The same goes for crypto investing, and not diversifying the portfolio is a common mistake that beginners make.
An undiversified portfolio is considered imbalanced and is quite risky to maintain. You might have made some money on a particular coin before, but that’s no reason to put all your funds in it. One single market shift can cause the coin price to fall, which can be cataclysmic.
It’s human to develop an interest in coins you’ve dealt with before. Although it seems safer not to explore, you’ll be entirely at the mercy of the single crypto. You should thus try to hedge that risk you’re exposed to as much as possible.
A better investment strategy is to buy multiple cryptos for a balanced portfolio. Distribute your wealth evenly between stable coins and those you think will rise fast. As a result, you’re able to even out the investment risks and rewards for a solid portfolio.
2. Buying Every Cheap Coin
Most new coins tend to be cheap immediately after they hit the market. For most investors, this is the chance they’ve been hoping for to make a decent return on investment. In an attempt to take advantage of the new coin, most novices buy every cheap coin available.
The chances of cheap coins developing are high, but there’s also the chance for failure. You shouldn’t ignore the fact that a slight drop on a cheap coin can cause significant losses.
It’s a lousy strategy to invest in coins only because they’re cheap. Research about each coin extensively before you can put your money on it. The background check on the coin is your best bet at avoiding a low-price trap on coins.
3. Over-Speculating to Make Absurd Profits
As an investor, you want to maximize on opportunities to ensure maximum profits. Most investors thus make the common mistake of over-speculating to earn more returns.
You might have heard that there’s a new coin that’s hot in the market. While it’s understandably hard to resist the temptation to invest all your monies, you shouldn’t. Over-speculating by investing heavily in crypto can be dangerous since a drop can result in major losses.
Over-speculating investors hold on to failing coins hoping they can make a comeback. Sometimes, it can be worth it, but, on most occasions, such coins tend to deteriorate further. You’re left counting your losses after you realize you were speculating on a dud.
To avoid over-speculating, be critical about the coins you invest in by considering market trends. Invest reasonably to make decent crypto investment profits and avoid significant losses.
4. Risking More Than You Can Lose
I’m sure money can be tight at first; it’s why you’re investing to change the situation. However, most beginners invest more than they are willing to lose, which can be a huge mistake.
Your finances are budgeted to cater to your needs and set aside money to invest. However, investing all your money can be the quickest way to get broke. Suppose your crypto investment doesn’t pan out; what then?
Know your budget limits to plan your crypto investments without affecting your finances. Also, create a stop-loss order to prevent losing all your money to a failing coin. The effect will be a worry-free trading period as you learn to trade like a pro.
5. Not Understanding the Crypto Market Dynamics
Crypto trading can be a tad complicated for beginners. One investing error most people make is starting to trade when you don’t fully understand the crypto market.
The dynamics in the crypto market are quite different from those in shares. As a relatively new and volatile market, you need to restart the training on investing in crypto. Not understanding the market dynamics means that you invest blindly, which can be risky.
As a beginner, stick to safety investments and don’t mind the meagre returns you make. You’ll understand the crypto market dynamics and can now trade like a pro with time. Understanding the market involves checking through price movements to know when to invest. There are a lot of trading platforms out there like swyftx.com to try.
6. Failing to Stay Updated on Market Events
The crypto market is ever-changing, so it’s imperative to keep up with the trends. However, most investors don’t stay updated on market events which is huge crypto investing mistake.
The crypto market is highly volatile, with the influence drawn from the various market events. Failing to stay updated means you don’t stay ahead of the market information. You thus miss out on tremendous market opportunities that would otherwise have decent returns.
Subscribe to a few credible sources to avoid staying in the dark on crypto market events. Be active on recent events information, which practically saves you from significant losses. You also get to take advantage of any crypto investing opportunities.
7. Buying High and Selling Low
A classic investing error for most beginners is buying high and selling low. It’s mostly a question of investors seeking security which can sometimes result in losses.
Take a case; you notice a coin performs well and buy at the current price to profit from the rise. A few days later, your coin starts falling, so as a cautious trader, you sell it to avoid losses. Doing this continuously results in marginal losses that cumulate into massive amounts.
Understanding the crypto market schematics is essential to avoid buying high and selling low. Panic selling is the leading cause of selling low, but you can beat it by knowing how the market works.
8. Lack of an Exit Strategy
Part of understanding crypto trading is knowing when to pull out your money. However, most investors focus on making money that they ignore having an exit strategy. Lack of an exit strategy results in unforeseen losses and is one critical mistake investors make.
Everyone wants to make the highest profits possible. As a result, you’ll likely not sell a coin when its price rises since you expect it to continue growing. Other investors on buying coins at a low are hopeful of a price rise in the future.
Truth is, every coin has its bad day, and if its price drops further, you may make considerable losses. Consequentially, you’ll have a hard time offloading the coin when it starts falling. Your hard-earned money is thus at the mercy of dynamic market forces.
Having an exit strategy is essential to know when to sell your investments. Have a target price for your entire portfolio’s profit and loss.
9. Ignoring High Brokerage Fees
After making your profit, you still need to work away to re-invest your money. A common mistake most people make is ignoring the high brokerage fees when buying crypto.
Many investors are focused on the profits and ignore the cost of investment. Substantial brokerage fees sometimes can eat into your hard-earned cash. You wouldn’t want all your returns to end up in the hands of your broker, would you?
Brokerage is more manageable today since user-friendly crypto ATMs are in multiple locations. You’re assured of favorable rates with no unexpected commissions you have to worry about. Check out this map to find a bitcoin ATM near me.
10. Following the Masses Blindly
I can bet that you’re in several social media forums that speak about their crypto investments. Most beginners make the mistake of investing in coins they see their peers buying. Such decisions are made oblivious of any market information, which can be risky.
Beware of the information on forums since some come from promoters paid to popularize specific coins. Following through with such investment information can be a huge pitfall for your investment capital.
Research about each coin before you can invest in it. You should find a balance between following market trends and avoiding dubious information.
Avoid the Above Common Crypto Investing Errors
Investing in options for cryptocurrencies can be lucrative if you know what you’re doing. The above guide has common crypto investing errors and how to avoid them. Following the tips can help you keep the crypto investment profits. Hope you liked the article.
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