Investing in cryptocurrencies continues to gain significant popularity among both individual and institutional investors due to their potential to offer high returns. The crypto industry is highly volatile when compared to stocks, which requires in-depth knowledge and a proper investment strategy to be adjusted accordingly. Since it is a newer form of asset class, many new investors find it difficult to understand the basics of investing in it.
As a result, many beginners in the crypto market make some mistakes that they could avoided easily. Mistakes are bound to happen in the world of crypto investment. No one can avoid these mistakes, instead, consider these mistakes as valuable insights to improve trading skills.
To save your money and time, this article will discuss the seven biggest mistakes beginner crypto investors make and potential remedies to avoid them.
7 Biggest Mistakes New Crypto Investors Make and How to Avoid Them
There are many things that you try for the first time, and Crypto Investment is no exception. You will definitely make small mistakes while entering into the crypto market. Consider the 7 mistakes listed below and appropriate solutions.
Lack of Proper Research
Conducting appropriate research is one of the crucial steps to take when entering the crypto realm. Most beginner investors don’t know about this step. They just enter into the vast area of cryptocurrency without even understanding its basic functioning and fundamentals. Hence, start your crypto investment by analyzing the white map, checking the roadmap and the token economy, its use cases, the developers, and everything else.
You must dedicate enough time to research the project, and its objective, and verify its legality. Always check out the project’s community to know what the members are saying.
Overtrading
Overtrading is another major mistake that beginner investors make, leading to significant losses. Your excitement and short-term goal to make significant amounts of money might take you more toward losses. Not all cryptocurrencies are Bitcoin. Similarly, not every cryptocurrency is capable of providing you with huge profits.
Create a well-defined plan before investing in any cryptocurrency. You must set clear entry and exit points whenever you plan to trade. Predetermine the number of trades you can manage in a week or a month. Do not invest more than you can afford to lose.
Investing in a Single Coin
Tens of thousands of cryptocurrencies exist in the world, and investing in just a single asset is completely useless. You must diversify your portfolio by investing in multiple crypto assets. Some of the popular cryptocurrencies in the industry are Bitcoin, Ethereum, Dogecoin, Litecoin, Tron, Binance Exchange, and USDT, which you can consider investing in.
Investing in multiple coins gives you leverage when one of the assets is underperforming, so you do not lose all your funds. You can sell the underperforming assets before losing significant amounts of money.
Forgetting the Crypto Wallet Password
Security is the main feature of cryptocurrency, which mostly depends on you. You have to create a crypto wallet when making cryptocurrency transactions. These cryptocurrency wallets are highly secured and can be accessed using passwords or private keys. No one can hack or steal your crypto wallet unless you allow them to do so.
Forgetting your password will result in the loss of your cryptocurrency and it is not recoverable. So it is important to remember your password. Since private keys are long alphanumeric sequences, it is hard to memorize them. So, you can note it down in a book.
Ignoring Fees and Taxes
You can purchase cryptocurrencies in many ways. However, it is important to know about the fees and taxes associated with cryptocurrencies. Most of the new traders believe that cryptocurrencies are excluded from tax implications. This is because of the legal infrastructure of cryptocurrencies.
Since cryptocurrencies are not legalized in every region, many investors do not know the legal aspects of them. Note that, simple buying and selling of cryptocurrencies is not taxable but if you make any profit from crypto trading, you have to pay certain taxes.
Similarly, there are many fees associated with buying crypto, such as blockchain fees, exchange fees, and other charges. Before investing in cryptocurrencies know the potential fees to save money.
Falling for Crypto Scams
The crypto market is always an attraction for scammers due to its lucrative returns. Scammers use phishing techniques, romance scams, deepfake scams, and many other fraudulent activities to attack crypto users.
Every investor must take adequate steps to thwart fraudulent activities to safeguard their digital assets. Always stay updated with the latest happenings and trends in the crypto industry.
Overconfidence After Making a Profit
You won’t always win in crypto trading and if you win once, it doesn’t last long. So once you make a profit, don’t be overconfident. It may lead to significant losses. Create a strategic plan and always stick to it will help you save your money.
Conclusion
Every trader is bound to make small mistakes while investing in cryptocurrencies. It is not a big deal. But, what matters is how you face those mistakes and resolve them. However, as a beginner investor, you must be aware of these mistakes. Identifying mistakes and successfully avoiding them in the future will help you to become proficient in the rapidly evolving crypto market.