Crypto investments continue to gain traction among individual and institutional investors due to their potential for moonshot and hedge against economic challenges like inflation. The fortune around digital assets has made their trade one of the best ways to make money online. However, the paradox surrounding digital assets hinges on their volatile nature as risky, profitable assets with no perfect prediction. However, you can ace this venture if you know the crypto investment mistakes you should avoid.
1. Lack Of Research
One of the common crypto investment mistakes is delving into an investment without thorough research. As such, factors like Fear of Missing Out (FOMO) often drive investors to make impulsive decisions without a good understanding of the fundamentals of a crypto project.
For instance, when a new crypto project emerges, it is imperative to look for a white paper that outlines its goals and objectives, including seeking reviews from reputable sources. We are at a time when scammers are rolling out fraudulent meme coins to steal funds from unsuspecting investors.
Therefore, Do Your Own Research (DYOR) will suffice to give you insight into the reputation and viability of the crypto asset you want to invest in.
2. Thinking All Crypto Is Bitcoin
All cryptocurrencies are not Bitcoin. In other words, Bitcoin is one out of many tens of thousands of assets in the crypto market. The huge media coverage and its high value as the most expensive crypto asset is what has made Bitcoin the face of the crypto market. But it is not the only crypto.
There are other coins, “altcoins”, like Litecoins, that have their value and features. Stablecoins are another crypto asset with a value pegged to commodities like the US dollar in 1:1 to maintain stability. Examples of stablecoins are USDT and USDC. There are also meme coins like Dogecoin with real time value.
Therefore, you must have a clear-cut understanding of the crypto asset you are investing into to inform your decision about it.
3. Investing In One Coin
Tens of thousands of crypto assets are in the market, and investing in one coin may be unsafe. Similar to how the financial market works in terms of diversifying portfolio investment in stocks and bonds, you may need to invest in multiple crypto assets.
Popular cryptocurrencies such as Bitcoin, Ethereum, Dogecoin, Litecoin, Binance Coin, USDT, Tron, etc, are some of the assets you can invest in. A diversified crypto portfolio gives you leverage when one of the assets has a bearish run, so you do not lose all your funds. This follows the cliché of “not putting all your eggs in one basket.”
4. Forgetting Crypto Wallet Password
One key feature of cryptocurrency is security, which mostly depends on you. For investors who decide to buy a crypto asset directly and store it in a wallet, it is almost impossible for the wallet to be stolen due to the impenetrable alphanumeric key system it employs. However, losing the key to the wallet will automatically lose access to the funds.
It can be unfortunate to invest in crypto and, in the end, lose the key to access your wallet. Hence, there is a need to ensure you keep your crypto wallet password safe and secure to enable your access always.
5. Making Errors During Trading
Simple mistakes can be common with beginner traders, which often involve typos – which is either sending crypto assets to the wrong address or selling for the wrong amount. This can be the case when crypto users are trying to send or receive funds between wallets with alphanumeric addresses. Missing one digit or an alphabet can irrevocably send the funds to the wrong wallet.
Meanwhile, tracing crypto and recovering it is not at its full potential, meaning that you may not be able to get the funds back when you make certain errors during the trading. So, you must always be patient and double-check when sending funds to crypto wallets.
6. Falling For Crypto Scams
The crypto market has increasingly become a hotbed of scammers devising different means or schemes to steal from unsuspecting users. Crypto scams are really on the rampage, with scammers employing phishing, romance scams, pig butchering, deepfakes scams, and other dubious ways to attack crypto users.
Therefore, you must stay updated with the happenings and trends in the crypto market to ensure the safety of your wallets and funds.
7. Disregarding Regulatory Compliance
The momentum that cryptocurrencies have been gathering has prompted governments to provide legislation about the activities of assets, especially for trading and Bitcoin mining.
For instance, some countries have banned crypto trading activities while other countries and regions are planning to roll out crypto regulations to guide users. Notable of this is the European Union Markets in Crypto-Assets Regulation (MiCA), which is expected to be effective from 2025.
Therefore, staying informed about the crypto regulatory landscape in your jurisdiction is imperative as you ensure your crypto trading complies with the law.
Notably, there is still a debate in the United States on whether cryptocurrency should be classified as “Securities” under the oversight of the Securities and Exchange Commission (SEC) or jurisdiction of the Commodities Futures Trade Commission (CFTC) as “Commodities.” There are also trading and mining regulations in some states in the United States as well as other countries.
8. Ignoring Crypto Fees And Taxes
Investing in crypto is not free in countries like Australia, the United States, or Canada. This is because you must comply with a crypto tax in Australia and a Canadian crypto tax structure to avoid sanctions. This is also the same for the United States.
In terms of fees, every crypto exchange charges a set amount. The fees can include transaction fees, gas fees, and blockchain fees. But the fees can vary depending on when you are using the network. Therefore, you must do research fees you should expect if you will invest in crypto.
9. Not Choosing The Right Crypto Exchange Platform
A crypto exchange is a platform on which you can buy or sell your asset. This can be your gateway to the crypto market. But rushing to trade on any platform can cost you your funds if you do not research choosing the right crypto exchange.
The crypto market is proliferated with many trading platforms, and you must know that not all platforms are legit. Therefore, you must take your time to study and choose an exchange that best meets your preferences. You may need to consider factors like trading fees, selection of cryptocurrencies, platform authenticity and security, educational content, etc., to inform your decision.
Talking about preference, Prestmit is the best place to sell Bitcoin and other crypto assets. We provide innovative tools such as a Bitcoin rate calculator, advanced security, and a user-friendly platform interface to make your trading profitable, safe, and seamless.
10. Not Knowing When To Exit And Take Profits
Crypto assets such as Bitcoin and Ethereum are volatile, which can cause them to have a bullish run, increasing the value of the assets you are holding. This may be the best time to sell your asset to make a profit because what will happen next can not be predicted.
If you are holding your coin for a short term, it is always essential to have an exit strategy, but long-term holders may not need it. You must have clearly defined goals for how much you want to make and at what point you would like to cut your losses and exit when investing in crypto.
Frequently Asked Questions (FAQs) About Crypto Investment Mistakes To Avoid
Is Crypto Investment Safe?
Crypto investment is risky and safe at the same time. This depends on the market actions and your discretion in taking certain measures to ensure the safety of your funds.
How Can I Avoid Crypto Investment Mistakes?
Avoiding crypto investment mistakes is not a one-fit-all approach – it is multifaceted. But it would help if you stay informed about the happenings and trends in the crypto market, as well as becoming cautious when trading due to the prevalence of crypto scams.
Can I Make Profits From Investing In Crypto?
Crypto investment can be profitable if you continue to gain more knowledge about how the venture works and the best crypto asset to invest in at a particular time.
Conclusion
We can not overemphasize the popularity of crypto investment across the globe, as the value of some of these assets continues to appreciate. But you must be aware of common mistakes in this venture you must avoid. While we have highlighted some of the mistakes in this article, it is essential to research more to put ahead of the challenge crypto investment may pose.
