Investing in crypto is both an enticing and exciting prospect.
It gives you an opportunity to make money from the frequent price movements, and it also lets you take advantage of the unlimited opportunities in the blockchain and crypto world.
However, millions of new investors end up losing money as there are lots of pitfalls along the way.
Before you even delve into the details of how to buy Bitcoin, below are some common beginner mistakes you should be keen to avoid.
Neglecting Research Before Investing
It’s easy to get carried away by the hype surrounding cryptocurrency.
Lots of beginners therefore end up investing in a project they are not familiar with just because it has been recommended somewhere.
However, this is a huge mistake, even when it comes to the safest of cryptocurrencies.
If you don’t do proper research, you will end up making uninformed choices that could prove quite costly in the long term.
Ensure that you have a clear understanding of the project before you commit your finances.
Read about its fundamentals, such as the principles it operates with and its uniqueness in the crypto space.
Understand how it’s designed to be used, the development team behind it, and the overall credibility of the project. You can then examine its potential and investment opportunities.
Having this knowledge will ensure that you invest in a credible project and make informed decisions.
Neglecting Risk Management Strategies
The crypto market is famous for being volatile or unpredictable. You can make quick gains or lose your money easily.
However, the allure of quick gains often tends to overshadow the possibility of potential losses. This means that you need to establish procedures that can help protect your finances.
The first of these is diversifying your assets. Do not rely on a single currency, and don’t store your crypto in a single wallet.
Spreading your finances between high-risk and low-risk assets will help you take advantage of new opportunities while minimizing risk.
On top of that, ensure that you implement stop-loss orders if you are an active trader. This is a technique that will automatically sell your asset when it reaches a predetermined price level.
This way, you will limit potential losses as your selling will be based on predetermined criteria, not emotions.
FOMO (Fear of Missing Out) Trading
This is one of the most common mistakes beginners make.
Fear of Missing Out (FOMO) in trading manifests in an investor fearing that they might be missing out on a great investment opportunity. In most cases, this is usually a rapid price increase or a new shiny coin surrounded by lots of hype.
FOMO makes an investor buy when the prices are high, and they may as well enter during the peak.
When the market corrects itself, they may then end up losing lots of money. And in the case of new coins, the project may eventually prove to be a scam or unreliable, leading to losses.
Although it’s tough to entirely get rid of FOMO, you can deal with it by developing an investment strategy.
Here, you will have a set of rules that set out clear entry and exit points as well as realistic profit targets.
You can then combine this with stop-loss orders to ensure that you don’t end up making huge losses.
Overlooking Security Best Practices
When it comes to crypto, a strong password is not enough. The fact that cryptocurrencies operate in a digital landscape means that there’s a huge potential for hacking and fraud.
On top of that, there are many projects you can invest in, but some of them are usually pump-and-dump scams.
As a minimum, you should ensure that you secure your wallets and crypto exchange accounts using two-factor authentication (2FA).
This will add an extra layer of defense, ensuring your wallet is safe even when the password is compromised.
Besides that, ensure that you keep your private keys safe and private.
You should then ensure that you do proper research on every project you want to invest in, and don’t just believe everybody when they tell you to invest.
Disregarding Long-Term Vision for Short-Term Gains
Although there are people who make quick money from crypto, getting into the market with this mindset can lead to the exact opposite.
This is because you will most likely make impulsive decisions that are not based on research or knowledge.
Avoid decisions driven by market sentiment or short-term price movements as they make it easy to fall victim to market hype, FOMO, or panic selling.
Instead, have a strategic long-term plan that incorporates several short-term strategies with a goal for long-term gain.
This will set you on the right path and ensure you enjoy a profitable journey in crypto.