Investing incryptocurrenciescan be exciting, but many new investors fall into common traps when it comes to trading and investing in cryptocurrencies.
From poor security practices to a lack of knowledge about the cryptocurrency markets, new investors can lose money quickly.
We'll cover the 10 most common mistakes new cryptocurrency investors make, and how you can avoid it.
1. Lack of basic knowledge of currencies encrypted
Newcryptocurrencyinvestors may be attracted by all the hype surrounding Bitcoin and other cryptocurrencies, but investing in cryptocurrencies requires understanding the asset class and how it works.
Investing in cryptocurrencies requires understanding the asset class and how it works.
Investing in an asset you don't understand, or trying to trade cryptocurrencies without understanding the basics of how cryptocurrency works, is a recipe for disaster.
Spending some time educating yourself about different cryptocurrency projects and the goals of each cryptocurrency company will make you a better investor.
2. Ignore fees
While there are many ways to buy cryptocurrencies, new investors may jump into buying cryptocurrencies without understanding how gas fees work on cryptocurrency trading platforms.
For example, purchasing cryptocurrencies using a credit card may come with a hefty additional fee (3% or more) and may also come with additional fees from your card company.
Learning which cryptocurrency trading platforms offer low fees and the best way to buy and trade cryptocurrencies will save a lot of money in the long run.
3. Short-term thinking
The promise of "get rich quick" within the market makes many new investors think only in the short term.
Although there is the potential to earn huge gains from investing in cryptocurrencies, there is also the possibility of losing all your money due to a bad investment move.
Having a long-term investment mindset will help you choose your cryptocurrency investments more carefully, and focus on selecting high-quality projects with long track records.
Trying to get rich in 90 days is a quick way to go bankrupt, but thinking of investing in cryptocurrencies as a multi-year process will help you build a larger crypytocurrency portfolio Thinking.
4. Keep cryptocurrencies in online wallets
Cryptocurrency is digital currency and requires a digital wallet to store it. Although using an online wallet is more convenient, it is much more risky than storing your cryptocurrencies offline.
Online wallets are more vulnerable to vulnerabilities, and hackers can drain your wallet through cryptocurrency scams or hacks.
The most secure way to store your cryptocurrencies is in an offline cold wallet which is basically a USB drive with advanced hardware and software encryption to protect your encryption keys.
5. Forget encryption passwords or phrases primary
Since cryptocurrency is kept in a digital wallet, these wallets require passwords to access them. If you forget your password, your cryptocurrency may not be recoverable.
Most wallets have a backup seed phrase to access funds, but if you lose or forget this seed phrase, there may not be an alternative option to get your money back.
6 Wrong wallet address
Transferring cryptocurrencies between digital wallets is how you take custody of your cryptocurrencies from the exchange, or how you send funds from one party to another.
But a common mistake new investors make is when they try to transfer cryptocurrency funds to their wallet, only to misspelt the wallet address.
When this happens, the cryptocurrency is sent to the wrong wallet address and they may be able to help with this, but it can be expensive extremely.
7. Being deceived
As a new asset class, the cryptocurrency market is full of scammers. In fact, the Federal Trade Commission (FTC) reported nearly $700 million in stolen cryptocurrency assets in 2021 alone.
These criminals use sophisticated phishing techniques to gain access to your cryptocurrency wallet and convince you to transfer funds to their wallet.
Cryptocurrency scams can occur via email or messaging apps, with perpetrators pretending to be acting in your best interest.
Wallets can be hacked simply by linking the online wallet to an app and giving it permission to access the funds.
Although this is a common practice in many cryptocurrency apps, scammers can use this technique to drain cryptocurrency wallet funds encrypted.
To avoid these scams, never connect your online wallet to an untrusted app, and keep most of your cryptocurrency funds in offline cold wallets.
Also, never give out your wallet password, seed phrase, or password private keys.
8. Use of leverage
New cryptocurrency investors may be lured by rags-to-riches stories of cryptocurrency trading and try to use leverage to multiply their returns.
The problem is that leveraged trading requires upfront collateral, and if the trade goes bad, you could lose all your money. Remember that leverage works both ways and can be doubled your losses too.
It is best for new cryptocurrency investors to avoid trading with leverage, and use it just gain enough trading experience.
9. Complex trading strategy
New cryptocurrency investors who try to jump straight into complex trading strategies because some YouTuber told them they can lose money quickly are abandoning cryptocurrencies as a whole.
It takes time to learn technical analysis, conditional orders, and how the currency markets work encrypted.
Investing in cryptocurrencies can be really simple. There is no need to create a complex trading strategy to try to grow your investment portfolio.
Similar to traditional investing, you can convert your dollar cost averaging into cryptocurrency without the need for active trading and stay glued to cryptocurrency terminals 24 hours a day.
10. Errors in the order
While some cryptocurrency trading platforms, such as Binance, specialize in making it easy to buy cryptocurrencies, many have complex order forms and trading platforms that can confuse new users when placing an order.
A simple decimal error can cost thousands, doubling losses. . In fact, a recent mistake cost a seller nearly $300,000 when they sold an NFT for 0.75 Ethereum instead of 75 Ethereum.
To avoid these costly mistakes, always check your orders or transfers before sending them. Cryptocurrencies are irreversible so it is best to check before submitting a transaction.
In conclusion
Investing in cryptocurrencies can see stressful, especially when you're just starting out.
But avoiding these mistakes can help you become a more confident investor and prevent you from making a loss thousands of dollars due to lack of knowledge.
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