Top 10 Mistakes to Avoid in Crypto Investing
Crypto investing requires the right insights. It is important for you to improve your investment methodologies every day when you invest in crypto. While doing so, you should try to avoid common mistakes in order to survive and prosper in the highly volatile crypto space. A few of those mistakes are:
- Not understanding the technology
Your crypto investing journey will be risky if you do not understand the foundations of the technology. You need to be able to judge projects for yourself so that you do not miss out on significant opportunities.
When you are a beginner at crypto investing, you might want to make twenty trades a day. But you should know that this is dangerous. In reality, there aren’t twenty good trading opportunities every day. Thus, overtrading leads to poor decisions and can also increase your tax liabilities.
- Not diversifying your portfolio
Remember to never put all your eggs in one basket, especially when it comes to crypto investing. It is essential to hedge and reduce your risk by investing in multiple assets. As a rule of thumb, you should own at least 5 different cryptocurrencies.
- Not using 2FA
It is vital for you to reinforce the security of your crypto investments. This is why you should enable 2FA on every sensitive website and thereby increase the security of your accounts.
- Treating cryptocurrencies like shares
Unlike shares, with crypto, you do not have ownership in a company or receive dividends. If you have invested in a cryptocurrency issued by a company, the company may profit without you receiving any benefit. The coin can drop even if the company is doing very well.
- Not understanding the market dynamics
There are thousands of altcoins in the crypto market that work in correlation with Bitcoin. If you do not understand these correlations, you can end up making poor investment decisions that can cost you a lot of money. So, understand the market dynamics before you engage in crypto trading.
- Chasing cheap coins
Do not make the mistake of thinking that buying low priced cryptocurrencies will give you higher returns. Know that several factors affect a coin’s price including its real world value and circulating supply.
- Researching poorly
It is needless to say that you will only become better at investing in crypto by researching more. So, check the economics of a coin such as its market cap, trading volume, price history, and total versus circulating supply.
- Falling for market propaganda
Don’t fall prey to deceiving headlines released by major news sites as most of these are intended to generate controversies and gain traffic, and can potentially be far from the truth.
- Not owning a hardware wallet
Hardware wallets are disconnected from the internet, which means that hackers can only obtain your funds if they steal your physical device and also know the passphrase to access it. Hence, they are a smart investment, especially if your crypto investment is worth more than $500.