Top 10 Crypto Mistakes You Should Avoid
Cryptocurrency is one of the most significant technological developments to take place since the internet’s inception. It is an important outcome of web 3.0 and forms the basis of trade in the metaverse. Cryptocurrency has radically transformed the landscape for investors and companies all across the world and brought trading over the internet to a whole new level.
Despite its recent acceptance as a genuine investment choice, cryptocurrency and the surrounding Web3 realm remain uncharted territory. If you are thinking of investing in crypto, you should understand that it is a risky digital asset that can bring you fortunes or ruin you.
Whether you’re a cryptocurrency specialist or just starting, there’s a lot to keep in mind when trading your way through the cryptocurrency market. Let’s look at some of the typical mistakes that cryptocurrency investors and traders make and how you may avoid excessive losses.
- Buying Any Cryptocurrency
Most people who want to invest in cryptocurrency either follow the herd or go with well-known currencies. We come across new information from various sources, including social media, bloggers, influencers, and viral investment fads. Relying on social media and following others’ advice is a recipe for disaster. The content you see on social media is mostly advertised, and sometimes people speculate fake market forecasts just to receive higher profits.
The purpose of trading crypto is to purchase it at a low price and sell it at a higher value. A poorly-informed investor ends up purchasing crypto at its peak value, and instead of making a profit, they face a heavy loss. For example, Ethereum has faced a significant drop in prices, and 1 eth to pkr has decreased by over PKR 34,000 during the first week of July. A person who invested at its highest rate during the last week of June has now faced a 15% loss. Always research well before investing in cryptocurrency.
- Selling at the Wrong Time
Buying the wrong coin at the wrong time ruins your investments. However, selling your coin at an inappropriate time, or emotion-driven selling, does more damage. When a cryptocurrency starts to dip down in value, it’s time to hold on. It often happens that a currency takes a sharp dip before skyrocketing in the following weeks. On the other hand, selling your entire stack once when the prices go up may not be wise. If there is a high demand for that coin in the crypto market, the prices will further go up, and you may gain a significant percentage of profit.
- Storing Your Crypto in Hot Wallets
The purchase, trade, and sale of cryptocurrencies all require cryptocurrency wallets. Online wallets, hot wallets, or software wallets are all terms we use for crypto wallets that come as a piece of software you use with internet connectivity. Since they are connected to the internet, these wallets’ private keys are prone to cyberattacks. On the other hand, hardware or cold wallets are more secure as you can store your private key offline and withdraw your digital assets after a trade or purchase.
- Sharing or Losing Your Private Key
There is no blunder bigger than sharing or losing your private key. But the dilemma is that lost keys are among the most common blunders made by cryptocurrency investors.
A private key serves as a unique identifier to prevent unwanted access to your cryptocurrency wallet. Blockchain transactions are created and signed using these private keys. You cannot reset or recover your keys if you lose them, unlike a password or a PIN. Therefore, it is critical to keep keys secure, as losing them would result in the loss of all digital assets.
- Trading in a Single Cryptocurrency
Trading in only one currency is another very common mistake by most crypto investors, particularly those who initially throw in small capital. Each currency has a different growth rate and demand. Try investing in at least two currencies at a time to increase your overall growth in the market, even when you have a low initial capital.
- Buying Too Many Different Cryptocurrencies
Don’t put all your eggs in one basket, they say. But putting your eggs in too many baskets will also make it hard to “carry” them. When you make your investments overly diversified, you lose track of it. Investing in too many cryptocurrencies at a time also ties up your cash in currencies which are not easily exchangeable or show a flat curve.
- Sending Your Crypto to the Wrong Wallet
Yes, you read it right! There are many new investors out there in the crypto market who carelessly and mistakenly send their crypto to the wrong addresses. A crypto wallet’s ID or address is a long string of letters mixed with numbers, generally consisting of 20-42 characters. People who don’t use the “copy address” feature when sending or receiving money from an exchange to their wallets often end up with careless typos and send the crypto to the wrong address. Always copy-paste your wallet address instead of typing it to avoid mistakes.
- Failure to Establish a Stop-Loss Arrangement
Traders need to adopt an exit strategy after making a bulk profit or want to stop their losses in a trade. The stop-loss tool enables investors to implement this strategy. This tool is available in nearly all popular exchanges and helps you mitigate your loss. Using a stop-loss tool, you can liquidate your digital assets automatically when the market price reaches a specific value to help you limit the loss of a trade.
It is possible to set both the maximum and minimum liquidation amount. That is, it also applies when a currency value goes up to a certain level. To prevent you from getting caught up in uncertainty or greed, it’s always better to exit once you have made enough profit.
- Using a Scam Exchange or Wallet
You risk losing your entire crypto portfolio when you choose a wrong or scam exchange. Always choose a trusted and well-known exchange that doesn’t charge huge transaction fees. Check reviews before using an exchange, and never be quick to start using it. A bigger trading volume, good trust score, and liquidity options are indicators of a good exchange. The same goes for wallets. Using a well-known wallet such as Coinbase, Trezor, and Exodus. Take the time to research exchanges and wallets to secure your investments.
- Getting Overwhelmed with High-Risk Crypto Market
The Crypto market is highly volatile, and the values of cryptocurrencies change every second. The enormous risk in this market overwhelms the majority of new investors. The higher the risks, the higher the profit; you should always keep this golden business rule in mind. Experienced investors exploit the high volatility of crypto markets to gain high profits. So if a currency’s market is going down, you should not get intimidated as they can go back up at any time.
Investing in cryptocurrency might be a lucrative financial option. However, you must ensure that your margin for mistakes is as small as possible. We all learn via mistakes, but avoiding these frequent pitfalls in cryptocurrency investment and trading can save you a lot of money. All of these large investors in the crypto markets have learned from the mistakes of others or their own, and you can benefit from great research to become a successful investor in the crypto realm.