The recent acceptance of cryptocurrency as a legitimate/ authentic investment option notwithstanding, the digital asset and its world of Web3 remain a veritable Wild West landscape. As time rolls by, new investors in the industry encounter a steep learning curve suffused with beginner mistakes.
These basic blunders can emanate from individual negligence or bad actors, and more often than not, they lead to loses involving huge sums. Besides, there have been recorded cases where newbies lost their entire crypto portfolio and this can happen through theft or investment errors.
Lack of Rudimentary Cryptocurrency and Blockchain Knowledge
Bitcoin (BTC) and other leading cryptocurrencies like Ethereum are surrounded by a lot of hype which has attracted new investors into the industry. However, traders who wish to wade into the turbulent waters of digital assets investments ought to have a good understanding of the asset class including their modus operandi as a lack of knowledge can lead to huge errors. Newbies are free to leverage crypto platforms to research and identify which crypto will explode in the near future and follow their recommendations during investments.
When new traders put their funds into an asset without proper investigation and understanding, it can result in an irredeemable disaster. Moreover, traders also need to have a profound understanding of cryptos-associated blockchain technology, including its impact on the industry. This will direct investors to projects that are likely to have useful applications and are worth investing in.
Studying different cryptocurrency projects and going the extra mile to know the goals of crypto trading platforms will make one a better trader in no time at all.
Investing Before Researching a Coin
Newcomers in the cryptocurrency industry are often overly excited when they witness how people are making tons of profit in the market, thus, they are susceptible to the mistakes of purchasing a coin without proper investigation. A coin that has just gone up in value is an irresistible temptation to newbies and many may end up buying them with the hope that they will explode in the near future.
However, the truth about the crypto industry is that it is too volatile, and value appreciation hardly lasts. As their value jumps massively, so do they fluctuate from time to time and the pendulum can swing either way. This is the true nature of the digital asset landscape.
An asset like Dogecoin for instance has been promoted by big names like Elon Musk which led to it gaining value fast. However, such value hikes don’t last, they can come and disappear within just a week. In October 2021, the market value of Dogecoin went from 0.234 to $0.308 per coin, this was perceived as a promising sign but the excitement was sadly short-lived as the prize crashed within a few days.
There are also the cases of s**t coins where cyber criminals create scam coins just to dupe investors. When these fraudsters launch a coin, they promote it to attract enough investors and once they accumulate massive investments, they jump ship. With that said, investors ought to DYOR (do your own research) on any coin before investing.
Not Storing Your Crypto Investment Securely
As digital assets, cryptocurrencies require digital wallets for storage which keeps them safe. Investors need trusted crypto wallets as against keeping their tokens and coins on an exchange. Custodial wallets or exchange-hosted wallets can be compromised or hacked, moreover, with this kind of wallet, investors don’t have access to their private keys as they are usually kept with the host (third party). Thus, technically speaking, the host indirectly owns the investment and not the trader.
An investor’s best bet is to keep his investment in a non-custodial wallet without any third-party hosts. This way, he can have total control over his tokens and coins. Information like passcodes and seed phrases should never be shared with anybody and should be stored in a secure location. Two-factor authentication is recommended for extra security.
Falling Victim To Emotions
As a crypto investor, you need to keep your emotions under check. Don’t be too carried away when a token gains or loses value as this has led many to panic sell just to cut losses. A good instance can be drawn from an investor who purchased BTC at $11,000 in August 2020 but a price deep a fortnight later led him into panic sales to cut losses. However, Bitcoin later rose to over $60k, underlining the fact that selling to cut losses is not the best choice.
To be successful, every trader must understand the inherent volatility of the crypto market where price increases and price drops can happen within seconds of each other. In the crypto-sphere, there is a common chant of HODL (Hold On for Dear Life) which encourages traders to exercise patience till the next trading cycle when values are expected to take a turn for the better.
Paying High Investment Fees
While joining the crypto trading market, paying exorbitant fees is counted among the worst blunders a trader can commit. This is because, the more investment fees a trader pays, the lesser the cryptocurrencies he gets. A good instance is the BTC ATM industry which is known for charging high fees to convert fiat into crypto. There are companies that take as much as 25% on BTC ATM transactions and those that are willing to take less charge between 10 to 15%.
Apart from BTC ATM companies, exchanges are equally guilty of overcharging. However, these fees are usually hidden and the firms involved get justification via spreads. Thus, the total fees you pay in blockchain transactions are heavily dependent on the time of the purchase and the company you used in currency conversion. With that said, it is recommended that newbies in the crypto investment landscape get enough information on fees and charges, do their business through the right exchange, and target the period when it will be less costly to buy. This saves a lot of investment funds in the long run.
The Bottom Line
Those who just started crypto trading can find the whole process a bit overwhelming, however, investors can avoid making common mistakes by arming themselves with enough knowledge about crypto and the Blockchain technology. They should endeavor to carryout proper research on any coin they wish to trade in and endeavor to secure their crypto portfolio after trading.
Besides, emotions should be locked away while trading in the highly volatile crypto market and traders should keep an eye on charges and fees that accrue from investments. All these can limit your chances of incurring losses or becoming a victim to cyber criminals and fraudsters.
