Summary: Buying crypto might look easy with so many platforms at your service, and so many resources to learn from. Avoid these 10 mistakes to make wiser decisions and make your crypto efforts profitable.
While the internet storms you with new ideas every day and the market stays unpredictable as ever, it is easy to go in the directions you don’t want to sway in.
We all have that one friend who will get lured into an upsurge of a coin and would want to get rich quick. While the coins may have their own heyday, it would be rather worrisome to invest purely on speculation or hearsay.
Let’s get right into the 10 mistakes one should definitely avoid before while buying crypto.
1. Sounds too good to be true? It probably is.
When you start out researching about any cryptocurrencies, be very thorough with the information you receive and where you receive it from. Get into the nitty-gritty of it, and take everything with a pinch of salt. Make sure that you don’t simply buy the dreams someone is selling on the shadier side of FinTwit (or Financial Twitter). Read, consult and look for data before buying crypto. That is one of the most efficient ways of staying safe with your money.
2. Diversify your portfolio
Diversifying your portfolio is the key. It might be worth your time to plan out your crypto trading or any investing efforts. Pro investors know that diversifying your portfolio is a powerful strategy to lower the risk and increase profitability. One division to consider is between long term and short term holds. Long term holds are usually coins that you would want to hold on to, for example many people invest in Bitcoin to hold on to it and gain from the investment in the future. The term HODL is therefore a crypto buzzword, meaning to hold on even when you’re tempted to trade.
Short term holds can be for coins that you involve in scalping or day trading. Scalping is about making fast profits, and involves quick decision making. You make quick trades and fast profits off reselling.
You should also consider how to rebalance your portfolio after you’ve made the trade you were interested in making. It could be challenging for a novice trader because it involves more planning and trading experience. However, you can develop a strict discipline and avoid much bigger risks in the long term.
There are more such trading strategies worth finding out about while creating a plan for your crypto investment.
3. Verify EVERYTHING
You heard some prediction on Twitter and you want to make a move? Even the biggest techpreneurs may go wrong sometimes. Or their strategies may just not fit with your goals. The best business mentality is minding your own. Getting tempted and lured is easy to fall into when everyone is talking about crypto and presenting you new ways of making quick profits. Even if it comes from the best known source, trust the charts and your good sense more than word-of-mouth. Verify everything you hear, reverify the trend predictions, read the chart beforehand and make a smart move.
4. Beware of the good old ‘pump and dump’ schemes
In the busy streets of crypto land, rumours are easy to pass around. But sometimes they are just rumours indeed. You may have heard of some “pump and dump,” schemes associated with shitcoins (a term used for coins that lack an actual value) where a group of (mostly) anonymous crypto traders pump up the value of a new cryptocurrency. Blinded by the hype, many others join in and hoping for it to be a way to make quick profits, buy this coin in millions.
Their values rise up almost instantaneously, convincing even more traders to jump in. This is usually when (based on past patterns) the initial investors ‘dump’ their share. The result? Convinced buyers lose money and the initial group of anonymous ‘pumpers’ make profits off the added shares.
One such lesson was to be learnt from Feed Every Gorrilla or ‘FEG’ coin that was supposed to be the ‘coolest crypto’ to invest in. It rose up to the outer space on the 8th of May. A 3-day journey of rocketing up on the charts as anonymous pumpers rose the value. On the sunny afternoon of May 12th though, the pumpers started pulling out and the value of the coin saw a landslide effect. They off-loaded about $120 million worth of profits. (source)
FEG Token Price on May 8th, 10:00 UTC
FEG Token Price on May 12th, 14:00 UTC
FEG Token Price on May 12th, 18:00 UTC
To not fall prey to such schemes, it is important that you back to point number 1 of this listicle. If it sounds like they are selling you some dreams, they probably are.
5. Know where to store your crypto safely
The mantra that crypto investors and traders live by is ‘not your keys, not your crypto.’ Over the past years, while buying crypto was fast becoming a norm, security of storage has come under purview too.
Whether you are investing or trading, it is important to choose a wallet wisely. You can choose to store your crypto in hardware wallets, or if you prefer to have it on the go then a cold wallet could be an option.
Mark Cuban, an American Entrepreneur and an active spokesperson on crypto, has talked about the security of crypto investment in comparison to traditional money.
6. Buy crypto in fractions
Pretty obvious for those who are already into the game for a long time, but quite useful to know for those who are just starting out. You can buy bitcoin, and most other crypto in fractions. Which means that you do not need a large amount of capital to start investing or buying expensive crypto coins. In fact it is not even advisable to start out with a huge chunk of money. You can start as little as $20 with platforms like CoinField.
7. Stay cool
If you need an adrenaline hit, watch an action movie. Don’t use crypto fluctuations as a source. It’s important not to stress over the ups and the downs of the market and stay focused on your plan. There are many ways to pace out your crypto investment and not get affected by every little twist in the story.
Cryptocurrencies, by feature, are volatile. Therefore, they are different from any other forms of investment you may be hitherto used to. While being well-informed is definitely a great personality trait to have in the crypto world, being calm and composed helps you steer away from the momentary temptations and associated scams.
If you are looking at strategies, Dollar Cost Averaging is also a great way of planning out your investment.
Having a plan helps you not only manage your money better, but it also saves you from making reckless decisions.
8. Invest only what you can afford to lose
The age old rule of not biting more than you can chew applies to crypto too. No matter what your predictions are, it is advisable to just invest an amount that you can afford to lose. Not to sound pessimistic and dull, but risking all your money on one go seems like an adventure sport not many of us may be ready for. This is essentially what differentiates an investment in contrast from a lottery ticket. Balance and good thought. It is always good to take a jump with a safety net.
9. Understand the technology you are putting your money on
Crypto is a culmination of finance and technology. It is not only to be understood financially, but also in terms of technology. Buying crypto while knowing the nuances of blockchain, cryptography, game theory and economics would make you unstoppable. – Borrow books, listen to podcasts, read blogs, practice trading without investing actual money. There is so much knowledge at your disposal currently about crypto and understanding it thoroughly could help you analyse the charts better while knowing where to look for what.
10. Bitcoin is not the only crypto
Bitcoin may be the digital gold and everyone is discussing it daily on how it has changed the world ,but it is also important to look beyond. While Bitcoin is undoubtedly the king of crypto, it is not the only one in the castle. Altcoins have recently lured more people in by enabling people to expand their portfolio. Not only that, they may bring in some really good returns and make investments much more fun. When choosing a coin to invest on, it could be a good practice to read about some of the alternative or trending coins. You will easily find some information of the top gainers of the week via https://coinmarketcap.com/
Cryptocurrencies are making the financial space much more fascinating. It’s not only that you can trade cryptocurrency anywhere in the world, 24/7but it offers the future of finance and new technologies to evolve.
Hopefully this article helped you to move forward in the right direction. If you are looking for a way to begin, start out by creating an account and make a small deposit on CoinField. You can explore all your favourite cryptocurrencies such as Bitcoin, XRP, SOLO and many more right away!