Understanding cryptocurrency, as fascinating a concept it might be, requires a lot more than basic financial knowledge. The crypto world and market are both very unpredictable which is precisely why usually takes a lot of time, patience, and dedication before one can have a proper understanding of both.
In this world of uncertainties, FOMOs, FUDs, and HODLs, one thing is certain: as a new cryptocurrency investor, you will make mistakes. Even though this is arguably quite natural, the most important thing is to learn from the mistakes. There’s an old saying by John C. Maxwell that states the following: “It’s said that a wise person learns from his mistakes. A wiser one learns from others’ mistakes.”
By learning from some of the mistakes made by other investors, you can potentially avoid costly slip-ups. Nevertheless, even if you end up making these mistakes, don’t be too hard on yourself and focus on growing thanks to them. To help you avoid some of the painful lessons and common errors usually associated with starting in the crypto world, we made a list of the biggest mistakes beginner crypto investors make.
1. Not carrying about security as much as you should
This involves everything from not doing the proper research in regards to your wallets and the crypto services used, to not keeping your private keys and hard copies of everything you own safe.
Many new crypto investors don’t give this a lot of thought. It’s very dangerous not to take advantage of every security feature provided by any crypto service. For example, even though most crypto exchanges boast two-factor authentication nowadays, but very few traders actually take the extra time to set it up.
The same goes for keeping hard copies, as most new investors are not in the habit of writing down the passwords and private keys and securely store them. This is dangerous since the private keys are your only way to restore all your crypto funds in case something happens.
Throughout cryptocurrencies’ short history, probably hundreds and even thousands of millions of dollars have been lost because people lost their private keys.
2. Investing more than you actually afford to lose
This is probably the first rule in investing, and most new traders often overlook it with nonchalance. A responsible and smart investor will always have the organizational skills to determine an investing budget and stick to it accordingly. Bottom line, don’t go all in. Don’t treat investing as you treat a game of poker, or you may end up losing everything fast.
3. Insufficient research
There another old saying that goes like this: “Knowledge is power.” The context might not be as off as one might think when referring to the crypto world as well. The more you know, the better. Many investors who just started fail to find a good community or reliable platform to learn from. Sometimes, a simple web search and reading a simple guide can mean the difference between a good and a very bad investment.
4. Letting your emotions run wild, embracing FOMO
Regardless of your mindset, it’s really hard not to be affected by FOMO. Don’t jump straight in each amazing opportunity to make money. Settle down, do the research, make sure that you understand everything. It’s important to note that the crypto world is so dynamic that you will encounter opportunities to make easy money almost on a daily basis. The most important thing is to say no to FOMO and to let the media hype drag you into a “bubble.”
5. Selling too early
This is a very controversial topic. Nevertheless, one of the biggest mistakes of early crypto investors is to sell when it’s “high enough.” Selling based on a hunch can be productive, but it usually isn’t. It’s essential to have a definite plan for selling your crypto. There are many investors who believe it’s better to hold onto your crypto and not sell it regardless of the market fluctuations. The main argument to be made in this respect is the fact that cryptos are still a very new concept and the market is bound to evolve and expand even more in the following years. At the end of the day, the decision is yours.
6. Not having enough patience
While holding onto your cryptos might not result in short-term gains, when trading and holding crypto, the goal is to gain in the long run. It might seem a bit exaggerated, but the crypto market is somewhat similar to the stock market. As Warren Buffett accurately says “the stock market is a device for transferring money from the impatient to the patient.”
These are the biggest mistakes you should avoid if you’re just starting out in the crypto world. As mentioned at the beginning of this article, mistakes are natural, and there’s no way of running from them regardless of how hard you try. However, knowing some of the most obvious mistakes can help you avoid a lot of trouble.