With Bitcoin and Ethereum setting new all-time highs, Elon Musk and Tesla tweeting about Bitcoin and other altcoins, and endless stories of people making (and sometimes losing) absurd amounts of money thanks to crypto, it’s not surprising that far too many people are interested in investing.
Even though prices have gone down recently and the market is a bit more uncertain, crypto is still a popular topic. Even with all these in mind, the world of crypto can be hard to understand, especially for people who are just starting out.
Even if you don’t know much about cryptocurrency, you can still use it to your advantage. However, it’s not something you can master in a day.
Before investing, it’s best for new traders to learn from the mistakes of others and get a sense of how things work.
This guide would list 5 common crypto investing mistakes and how to avoid them.
1. Giving Out Your Seed Phrase And Getting Ripped Off
Every good thing has a bad side. There are hundreds of hackers and scammers in the crypto world who want to steal your hard-earned money. Even people with a lot of experience in their field have fallen for the simplest scams because they let greed and temptation cloud their judgment.
Many of these scams depend on the user giving the hacker their seed phrase, which is a series of words that gives the user access to all the money and information in their wallet, including their private keys and funds. Beginners often get scammed when they put their seed phrase into a site they think is legitimate or safe but is actually a duplicate phishing landing page.
This is just one of many warnings. Nobody should ask you what your seed phrase is. If they do, you should either “x” out from the site right away or ignore the message. Never click links or download files from direct messages (DMs) on sites like Twitter, Discord, or Telegram.
The fastest way to lose all of your money is to give out your seed phrase.
2. Not Picking The Right Exchange Platform
You need to join a cryptocurrency exchange before you can start trading. Unfortunately, a lot of newbies rush into this first step, which can cost them a lot of money in the long run.
Here are some essential things to consider when picking the suitable exchange for your needs:
- The platform’s simplicity and ease of use
- There are many types of cryptocurrencies.
- Low costs and reasonable prices for assets
- Being able to directly buy crypto with AUD
- Authenticity and safety of the platform
- Educational content
- Reliable and individual customer service
- The security that is regularly updated and cold, offline storage
- Useful trading tools
Platform security is very important. Low fees will save you a lot of money, and personalized customer support can give you the advice and help you need to be a successful and well-informed trader.
Also, you have to make sure to choose a cryptocurrency exchange with a lot of coins and an easy-to-use interface. Not all crypto platforms are easy to use, which can be a huge pain if you’re just starting out.
3. Keeping All Your Crypto In A Hot Wallet
There are two kinds of crypto wallets: “hot” and “cold.” Each wallet comes with its private key, a cryptographic password that lets users get their money.
Hot wallets are virtual, always connected to the internet, and always online. Even though these make transactions quick and easy, the fact that they are always online makes them easier to hack. As a general rule, it’s risky to put any amount of money in a hot wallet that you can’t afford to lose.
Cold wallets are physical storage devices that store your cryptocurrency offline and can only connect to the blockchain with your private key. They can store multiple cryptocurrencies, making it much less likely that your account will be hacked.
A few more safety tips for wallets:
- Two-factor authentication (2FA) should always be used on all wallets and exchanges that support it.
- Don’t give your private key to anyone.
- If you don’t plan to actively trade your crypto on an exchange, don’t keep it there. Your simple password is the only thing between a hacker and your money.
4. Panic Selling/ Buying
Price movements are normal in the world of cryptocurrencies. When prices go down, many new investors panic, and many of them over-watch their portfolios and then sell quickly to cut their losses. You can only lose a trade when you sell, so keep that in mind.
Sure, selling when things start to go wrong can save you a lot of money, but in the long run, you’ll do much better if you can deal with price changes while sticking to your limits and investment goals.
Another trap to watch out for is buying in a hurry. Most newcomers believe more than they should. Many people are way too eager to get involved with “the next big thing.” This can cause them to rush into a trade without first doing enough research or evaluation.
Finding the next Bitcoin or Ethereum that hasn’t been found yet shouldn’t be your main trading goal. If you want to make real, long-term money in crypto, you should research and evaluate each coin before putting money into it. You’d have to let go of your fear of missing out and try the slow and steady method!
5. Spending Too Much On Gas Fees
“Gas” is a fee that people should pay to reward cryptocurrency miners for the computing power they use to verify and carry out transactions on a blockchain. Gas fees are based on how busy the network is at the time of the transaction.
The more people using the network at that time, the higher the fee. This can make a simple, cheap transaction turn into a nightmare where the gas costs more than the transaction itself.
Some trades, like well-timed trades or NFT mints, have to be done at a certain time. But shifting tokens from one personal wallet to another may not be as important. If you can wait, always try to find a time when gas prices are low. If you don’t do that, you’re just throwing money away in cyberspace.
Using tools to find times when gas prices are low is a great way to avoid having to pay too much for gas.
6. Taking Everything You Read As True
Even in the world of cryptocurrency, not all advice is the same. Beginners often make the mistake of following tips and advice from people they don’t know or have never heard of that they see on social media.
There is a lot of advice on how to trade crypto on the Internet, but a lot of it is just false hype, and in some cases, it is just plain wrong.
Major news sites also often report very bad and scary news. Some of these news items and sensationalized headlines are written solely for the purpose of attracting attention, causing trouble, and spreading fear, uncertainty, and doubt (fear, uncertainty, and doubt).
If you are going to listen to someone’s advice, make sure they know what they are talking about and have a good following or reputation.
7. Emotional Vulnerability
It is typical to get carried away in the idea that cryptocurrency is a way to get rich quickly and let your emotions get in the way. FOMO and FUD are two phrases you’ll hear a lot on the internet.
FOMO means the “fear of missing out.” Every day, we hear about new investments that made people rich. Remember that hearing about someone else’s success is not a good way to decide how to invest. When you invest, you should always do your research and have a plan.
The same reasoning holds true for FUD (fear, uncertainty, and doubt). Don’t let someone else’s bad analysis of investment affect your own choices. Traders who give in to FOMO and buy at all-time highs are often taken in by FUD when they sell at a big loss on impulse. Most importantly, never put more money into an investment than you can stand to lose. The markets are dynamic and, in some cases, pretty unbalanced. This makes it easy for prices to slip and for people to take on too much debt. Don’t ever let greed cloud your judgment; don’t forget to take your profits.
