It’s no surprise that everyone is talking about Bitcoin and other cryptocurrencies these days. With the price of Bitcoin skyrocketing, many people are jumping headfirst into this new world without understanding all the basics. For example, did you know that there are 5 common mistakes that newbies make when investing in cryptocurrency? In this blog post, we will discuss some of those mistakes and how to avoid them!
1. Investing without proper research
One of the biggest mistakes that newbies make is diving right into cryptocurrency investing with no prior knowledge. However, making an informed decision requires researching various factors about these digital currencies. Some questions to consider are: How does it work? What’s the purpose behind its creation? Who created it and why? Will I be able to use this currency in real life or online at places like Amazon/eBay etc.?
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One of the major terms in crypto that need proper research is its volatile nature. As everyone knows, fluctuation in every trading market can have a deep impact on the trading market. Where the fluctuation in other forms of trading can have some negative impacts and provide losses, in crypto its volatile nature has huge potential for providing profits. Volatility is one of the major reasons behind the success stories of many crypto traders overnight. But it is also one of the main reasons behind the losses of many crypto traders specially for the beginners who stepped into the market without knowing the measures that should be taken for the market volatility and hence ended in huge losses.
2. Making a quick buck
It’s no secret that Bitcoin, Ethereum, and other currencies have skyrocketed in price recently. This has led many to assume that they will continue increasing until the point where it is too late for them to invest. However, this assumption couldn’t be further from the truth! Cryptocurrencies are volatile investments which means their prices fluctuate rapidly over short periods of time based on various factors (see more here ). For example, just last year Bitcoin was worth $900 but then increased by 300% reaching $3000 before dropping down again at one stage to under $2000. Make sure you understand exactly what cryptocurrencies are before investing in them because once you buy some coins there is nothing stopping their value drastically as we’ve seen with Bitcoins.
3. Expecting overnight success
This is another common mistake that many newbies make. Just because you invested in Bitcoin or any other cryptocurrency doesn’t mean it will automatically skyrocket in value and generate millions of dollars! This takes time, patience, research, and determination to see your investment through before actually reaping the benefits. For example, let’s say someone bought $200 worth of Ethereum when it was priced at just under $15 per coin back in December 2016 with plans on increasing their holdings over a long period of time until its price reached around $50 so they could sell them all off for a nice profit. However, since then the currency has increased by 100% reaching nearly $30 but also dropped down below $13 again (see more here ).
As you can see, it is important to remain calm and not be swayed by short-term price changes when investing in cryptocurrencies! Investing in crypto needed some patience and it will be much safer to start experiencing your crypto trading journey by investing such an amount that you are willing to sacrifice, and which can not affect your financial posts. Many of the newbies in crypto trading started by investing a major part of their money and when they have to face the loss in it, they ended their crypto journey in the loss that affected their financial careers as well. So it is better to invest as the amount of money you want to lose, it will allow your brain to learn are the strategies and techniques that should be reflected over time.
4. Not having a plan
Similar to the last mistake, not having a solid plan in place can be detrimental to your success when investing in cryptocurrencies. This means knowing what you’re going for short-term or long-term profits? What percentage of your portfolio will you allocate to digital currencies? And importantly, WHEN will you sell your holdings? Trying to time the market is notoriously difficult and can lead to missed opportunities so have an idea of when you want out beforehand!
5. Not using appropriate storage
Lastly, another common mistake made by newbies is not properly storing their coins. It’s important to note that the safest way to store your currency is on a hardware wallet rather than in an online web-based exchange for extended periods of time (see more here ). Web-based exchanges are vulnerable to cyber attacks since they operate via remote access which can be breached into allowing hackers access to user accounts and funds – leading you straight down the road of losing all your money! So make sure you do your research before choosing where you want to hold/store them. Alternatively, if it is too much of a hassle then simply trade out parts of your portfolio when needed instead of or use different wallets for each type of cryptocurrency.
There are huge potential profits to be made with cryptocurrencies but it’s crucial you understand exactly what they do, how they work, and the risks involved before investing. By avoiding these common mistakes newbies make when entering this space will mean your chances of success increase exponentially.