Rookie mistakes: What not to do when investing in crypto as a beginner

Betty Bugle

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a man puts a crypto coin into a piggy bank

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When it comes to crypto investing, everyone knows that the potential for substantial gains comes at the expense of a greater risk of losses. One may have the opportunity to earn higher and faster returns than in traditional markets, but they’re also much more likely to experience sudden and considerable losses that can destabilize their portfolios and even lead to bankruptcy if they haven’t taken the necessary precautions. 

It’s the gift and the curse of the cryptocurrency market and a tradeoff that many investors are willing to accept, so hardly anyone gets into crypto thinking it’s going to be smooth sailing. It’s not uncommon for the Bitcoin and ETH price to spike or slump unexpectedly and influence the rest of the assets, so things can change drastically in a matter of days or even hours. 

A word of caution for newbies 

Versed investors who are familiar with the ebb and flow of the market are more adept at navigating these stormy waters and avoiding pitfalls. However, for beginners, trading or investing in crypto can feel like walking through a minefield filled with all kinds of traps and tricky situations. One wrong step, and it could be the end of their venture into the digital landscape. 

Over the years, we’ve heard countless stories of investors losing it all due to their lack of experience and skills, which caused them to make bad calls, and it’s usually the same mistakes that ruined their dreams and plans. That’s rather unfortunate, since most blunders could have been avoided if one would only have taken the time to learn from other people’s mistakes instead of repeating them. 

In this blog, we’re going to go over some of the most common rookie errors you need to dodge if you want to save yourself the trouble and pain of financial losses and make smarter investment decisions.  

Getting started without doing your due diligence  

While you don’t have to be a crypto expert to start investing, you do need to have some basic knowledge about this asset class before you dive in. Many people go into it without having a good understanding of the technology and how digital currencies function. They don’t know how to evaluate their options, spot promising crypto ventures, or identify risks, which reduces their chances of successful trades while also making them more vulnerable to scams and frauds. 

It’s therefore vital to educate yourself on crypto fundamentals and learn about the specific features of different crypto projects before you get started. Get your information from reputable sources and stay up to date with industry developments. 

Giving in to FOMO 

Lack of adequate knowledge is linked to another common phenomenon among crypto investors: FOMO. Hype and fear are powerful forces in their own right, but when you combine the two, you get an even stronger stimulus that can make people do things they wouldn’t normally do. When everyone is running in the same direction, you may be tempted to run with them out of fear of being left behind or missing out on something big. But following the crowd is not the best way to approach crypto investing. Hype is no substitute for research, as you can end up wasting your time, energy, and money on fruitless pursuits. 

For this reason, you should do your best to leave emotion out of the equation and base your investment decisions on in-depth research and a thorough analysis of the market, taking into account relevant crypto metrics, project specifications, and trends, and keeping a close eye on the factors influencing the crypto space.

Chasing quick gains 

Digital currencies gained notoriety as an investment mechanism when the first Bitcoin boom happened, turning average individuals into millionaires almost overnight. As a result, crypto investments earned a reputation as a venue for fast gains. But that was back when crypto was barely making its first steps toward mainstream acceptance, and a lot of things have happened since then. 

This erroneous idea that crypto might be somewhat similar to a get-rich-quick scheme is making many investors focus solely on short-term results and ignore the long game. Doing so can limit your investment prospects and lead to missed opportunities. You need to manage your expectations and goals and realize that it’s highly unlikely to amass a fortune in a brief timeframe, but it’s very much possible to make a generous profit if you’re patient and cultivate a long-term mindset.   

Using hot wallets exclusively 

Crypto is known for being a highly secure asset class in the sense that it’s powered by blockchain technology and employs cryptographic protocols to ensure the integrity of transactions. However, this inherent feature doesn’t guarantee the safety of your investments, which largely depends on how you store and manage your funds.  

As such, keeping your crypto stash in a hot wallet that stores your private keys online and can, therefore, be accessed via the internet is not the safest option, despite being the most convenient one. Since hot wallets are more vulnerable to cyberattacks, you should consider using a cold wallet instead, which is a hardware or paper wallet that keeps your private keys offline and out of hackers’ reach. Also, make sure you keep copies of your public and private keys because if you lose them, there’s no way to recover them, and you’ll forever lose access to your crypto funds. 

Not diversifying 

Investing in crypto can be a profitable enterprise, but make sure you don’t put all your money into digital assets. If you bet it all on crypto, and it doesn’t turn out the way you expected, you might not be able to recover financially. 

Diversification is the golden rule of investing, as it will help you maintain a balanced portfolio and keep risks at a reasonable level. It’s also recommended that you diversify within crypto and spread your investments across several projects to maximize your earning potential.  

The bottom line is that you should tread carefully as a beginner and use common sense to stay out of trouble. Be patient, educate yourself, stay objective, and you’ll be able to bypass pitfalls and enjoy a positive investment experience.  

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Betty Bugle