For the past couple years Cryptocurrency investing has been giving stocks a run for its money.
More and more people are investing cryptocurrencies as it’s more accessible than the stock market.
For example, an international citizen cannot directly invest in the New York Stock Exchange. On the other hand with crypto anyone from anywhere can invest in without a high barrier to entry.
That been said, as beginner they’re some mistakes you should avoid when investing in crypto.
1. Not doing enough research into where to buy and sell cryptos
Not every cryptocurrency exchange is the same when it comes to fees, liquidity, and customer support.
It’s very important to take these factors into consideration when choosing which exchanges you plan on using.
Also, it’s a good idea to diversify your portfolio by not putting all of your eggs into one basket.
For example if 5% of the trade volume in the world takes place at exchange A and we know that 60% take place at exchanges B and C then if something were wrong with exchange A their would drop in value would not be as bad for you.
If you are too nervous with the idea of manually setting up an account on an exchange then there are always brokers to help you out.
However, expect brokers to take a commission of up to 10% off the top of your investment.
2. Spreading yourself too thin across all cryptocurrencies
It’s very important to know what kind of cryptocurrency you want to buy before investing.
If you aren’t sure which cryptos are most practical or have the most potential for growth, here are some criteria that you should keep in mind when making your selection:
- Transaction speed (See list of cryptos with the fastest transaction speed)
- Privacy
- Liquidity
- Governance level Track record
Instead of investing in many cryptos at once, it is better to know all of their upsides and downsides before committing any amount of money to them.
3. Not using 2-factor verification on exchanges
Although not many people use 2-factor authentication methods besides SMS texts, it is an incredibly useful tool for keeping your Bitcoin or Ether out of the wrong hands.
However there are some problems with SMS verification including the fact that you’ll need good reception, can be tricked with social engineering, and don’t always authenticate properly.
Regardless of which method you choose, just remember that if anyone gets access to your login information then they could easily take all your investment into cryptocurrencies away from you!
So always make sure to have 2-Factor Authentication enabled wherever possible!
4. Buying cryptocurrencies from the wrong sources
When deciding where to buy your cryptocurrencies from it is of great importance that you research each source for any form of scam they might have had in the past.
Here are some things to look out for like fake apps that steal your information and bad reviews from past users.
If you find out about a certain company having financial problems, leaving their customers stranded, or acting illegally in any way then be sure not to invest with them.
5. Focusing solely on crypto as an investment strategy
The cryptocurrency market is still fairly new and therefore doesn’t provide as many options for investors as the stock market does.
The majority of people who are new to cryptocurrency trading tend to get excited for all the possibilities of investing in e-commerce .
Although it is true that there are some growing companies out there like Coinpayments and Shopify , most people will not make enough profit off their investment in cryptocurrencies to be able to retire early .
There are some currencies that have potential for growth in other areas though, including: Dash (governance), Monero (textile industry), Litecoin (electronics & hardware), Ethereum (applications).
But none of them can guarantee a profit like you would get from investing in the stock market .
6. Not taking advantage of the bear market
Although it may seem scary to invest when things are looking low, bear markets can be very beneficial because they allow you to buy cryptocurrencies at good prices.
This is especially true if you end up buying during a dip and holding onto them until the market recovers.
If this were to happen then not only would your investment double, but you’d also end up making more money than someone who invested pre-bear market highs!
7. Investing in ICOs without due diligence
ICO stands for Initial Coin Offering and it has become a huge trend over the last pass couple years.
Anytime a crypto company wants to raise money for the development of their currency, they will launch an ICO and sell tokens .
Even though it is possible to invest in cryptos through ICOs, you should always do your research on them first before putting any capital into them.
A great place to start your investigation would be with these questions:
- What are the qualifications of the developer team?
- How much need does this token fill?
- Does it have real-world applications ?
- Who are their advisors ?
- What are people saying about it online ? Is there a strong community with different opinions?
You can also check out this article on some more specific pointers when evaluating cryptocurrencies.
8. Not having an exit plan
One major mistake that most newbies make when starting with cryptocurrencies is that they don’t have an exit plan .
When you are investing in traditional markets, it’s often clear why you would want to buy a stock. But with cryptocurrencies this is not always the case.
Even though there are many projects out there that people just put money into because the price looks good and they hope it will go up, having a specific goal or reason for buying your cryptos can help keep you from selling too soon.
9. Not researching and planning before investing
Although this isn’t exactly a mistake per se, it does play a big part in keeping you from making mistakes.
Since so many people rush to invest as soon as a new currency comes out, you might end up missing out on a great opportunity .
That’s why it’s so important to do your research and decide how much money you want to invest in cryptocurrencies before doing anything.
With so many options it can be easy to jump from one currency to the next without taking the time to check what each of them has to offer.
Try sticking with a single currency or pairing until you feel comfortable that you have a good understanding of the cryptos market .
By following these tips and being more mindful while investing in cryptocurrencies, you will be far less likely to make mistakes.