Investing in cryptocurrency can be thrilling, but many novice investors fall into common pitfalls while trading and investing in cryptocurrencies. New investors can easily lose money due to inadequate security methods or a lack of expertise about crypto marketplaces.
We’ll go over the top ten mistakes made by beginner crypto investors and how to avoid them.
1. Lacking Basic Crypto Knowledge
Investing in crypto requires a deep understanding of the asset class and how it works. Investing in an asset you don’t understand or attempting to trade cryptocurrencies without understanding the fundamentals of how they work is a prescription for catastrophe. Taking time in learning about different crypto projects and the goals of each crypto company will help you become a better investor.
2. Failure to Pay Fees
Even though there are many ways to buy cryptocurrency, new investors may just buy it without knowing how exchange rates work. If you use a credit card to buy cryptocurrency, for example, you may have to pay hefty surcharge fees (3% or more) and other fees from your card company. Knowing which cryptocurrency exchanges have the lowest costs and the best strategy for purchasing and trading cryptocurrency will save you a lot of money in the long run.
3. Thinking in the Near Term
The market’s promise of “getting wealthy quick” has many new investors only thinking in terms of the short term. Also, you could make a lot of money from a crypto investment, but you could also lose everything if you make a bad choice.
With a long-term investment mindset, you’ll be able to choose your crypto investments more carefully, focusing on higher-quality projects with long track records. Attempting to get rich in 90 days is a sure way to go bankrupt, but viewing cryptocurrency investing as a multiyear process will help you develop a more smart crypto portfolio.
4. Cryptocurrency Storage in Internet Wallets
Cryptocurrency is a digital currency that must be stored in a digital wallet. While using an online wallet is more convenient, it is also significantly more dangerous than holding your cryptocurrency offline. Internet wallets are more vulnerable to security flaws, and hackers can deplete your wallet via crypto scams or hacks. Offline hardware wallets, which are simply USB sticks with superior hardware and software encryption to protect your crypto private keys, are the most secure way to keep your crypto.
5. Loss of Crypto Passwords or Seed Phrases
Because cryptocurrency is stored in digital wallets, passwords are required to access these wallets. If you lose your password, your cryptocurrency may be lost forever. Most wallets feature a backup seed phrase that can be used to gain access to the funds, but if that seed phrase is lost or forgotten, there may be no other way to recover your funds.
6. Incorrect wallet address
Moving cryptocurrency between digital wallets is how you get custody of your cryptocurrency from an exchange or transmit money from one party to another. But a common beginner mistake is to try to send cryptocurrency funds to your wallet but type the wrong address for your wallet. When this happens, the cryptocurrency is sent to the wrong wallet address, and it may not be possible to get it back. While there are recovery services that may be able to assist with this, they may be very expensive.
7. Being swindled
As a new asset class, the Bitcoin market is rife with con artists. In fact, the FTC reported roughly $700 million in stolen cryptocurrency assets in 2021 alone.
These thieves use sophisticated phishing methods to get into your cryptocurrency wallet and convince you to send money to their wallet.
Scams involving bitcoin can happen through email or chat apps. The bad guys will say they are looking out for your best interests. Wallets can be hacked by connecting them to an app and giving that app access to the funds. While this is standard practise for many crypto apps, scammers can exploit it to syphon crypto wallet funds.
To avoid these scams, never connect your online wallet to untrusted software, and keep the majority of your cryptocurrency cash in offline hardware wallets. Additionally, never share your wallet’s password, seed phrase, or private keys with anyone.
8. Using Leverage
People who are new to crypto trading may be tempted by stories of people who went from poor to rich by trading crypto and try to increase their earnings by using leverage. The problem is that leveraged trading requires collateral up front, and if a trade goes wrong, you could lose all your money. Remember that leverage works both ways and can also magnify your losses.
Novice crypto investors would be wise to avoid using leverage until they have gained adequate trading experience.
9. Difficult Trading Strategy
Novice crypto investors who try to dive right into intricate trading techniques because a YouTuber told them to can soon lose money and give up on cryptocurrency altogether. Learning technical analysis, conditional orders, and how the crypto markets function takes time.
Investing in cryptocurrency might be rather straightforward. There is no need to devise a complex trading strategy in order to increase the size of your account. You can dollar-cost average into bitcoin, similar to traditional investment, without the necessity for active trading or being hooked to crypto charts 24 hours a day.
10.Order Mistakes
While some cryptocurrency exchanges, such as Coinbase, specialise in making it easy to buy cryptocurrency, many have intricate order forms and trading interfaces that might be confusing to beginning users. A mere decimal point miscalculation when placing an order might cost hundreds of dollars, increasing losses. In fact, a vendor recently lost nearly $300,000 after selling a premium NFT for 0.75 ether instead of 75 ether.
Always double-check your orders or transfers before submitting them to avoid making costly mistakes. Because cryptocurrency is irreversible, it’s wise to double-check before submitting a transaction.
In conclusion
Investing in cryptocurrency can be intimidating, especially if you are just getting started. But avoiding these blunders can help you become a more confident investor and save you thousands of dollars due to a lack of knowledge. And if you’re looking for an alternative to crypto trading, try dRisk.
The goal of dRisk is to give people a way to interact with the cryptocurrency market in fun and interesting ways. With dRisk, players can try out different profitable investment strategies.
