Investing in cryptocurrency can be a lot more trickier than it is to invest in stocks. Thanks to the volatility and the market being operational 24X7. But investing in cryptocurrency is an opportunity that shouldn’t be missed. The cryptocurrency market has a lot of growth potential. It can give you an upper hand in your fight against inflation.
If you are a beginner who wants to try his hands into the crypto world, here are 8 mistakes that you should avoid:
1. Diving in to invest before knowing the basics
If you are a beginner, I know how eager you are to make your first trade. I have been through the phase. But you just don’t need to rush it. The success of your first few trades would decide whether you stick to investing in cryptocurrency or not.
Take out time to learn the basics about cryptocurrency, blockchain, crypto exchanges, and crypto-wallets. You should be able to read the price charts and gain meaningful insights out of them.
Make your first trade only when you are confident about the knowledge you have gained.
2. Not making a move
Another thing that works against you is a lack of action. Knowledge is useless if it isn't applied. Start investing with a few bucks if you aren’t confident. Start with whatever little you can afford to lose. But you need to make your first move. Don’t let the fear of losing all your money intimidate you from trying.
3. Opting for cheap coins
You might think that it is easier for the price of a cryptocurrency to go from $0.001 to $0.0015 than it is to go from $10 to $15 for some other cryptocurrency. But it is definitely not the case. The prices of any cryptocurrency are governed by a lot of factors. It’s not just the price that you need to consider.
The reason for the coin to be priced too low could be the huge circulating supply for the coin, and less demand. Cheap coins won’t make you a millionaire overnight!
4. Buying at ATH (All time high)
Investing at an all-time high involves very high risk which you shouldn’t be willing to take. Once the coin reaches an all-time high, there is a high probability that investors/institutions who had invested in the coins would try to encash their profits, thereby decreasing the prices of the cryptocurrency.
5. Not selling and encashing your profits
It is important to encash your profits even if the market is in a bull run. When you feel the prices won’t go high any further, sell and encash your profits. A bull run won’t remain for an eternity. It will surely end one day, wiping out all the gains.
You can invest again after the storm settles and prices get back to normal.
6. Not diversifying your portfolio
Don’t put all your eggs in one basket is probably the best advice for a beginner. If one fine day Bitcoin can lose its value, anything can happen. Don’t put all your money in that one cryptocurrency even if you are certain that the cryptocurrency you want to want to buy has a bright future.
You need to put your money in more than three or four cryptocurrencies so that you don’t lose all your money if the price of that cryptocurrency fall. But be wary of the fact that over-diversifying your portfolio can also be a part of a bigger problem. Not every cryptocurrency is listed on all the exchanges. So you might have to invest through more than one crypto exchange which will eventually make it hard for you to keep a track of your investments. Don’t put money in every cryptocurrency that you see, it would make it extremely difficult for you to manage your portfolio if you over-diversify it.
7. Poor research
Research is definitely the most important step before investing. You shouldn’t blindly follow investment advice from fake crypto-gurus. You can do much better than such gurus if you do your research well. Don’t get carried away by what others say. If you feel the cryptocurrency has a promising future, you shouldn’t shy away from investing in it. But make sure your instincts are backed by research.
8. Spending time trying to make a fortune out of faucets
Cryptocurrency faucets won’t make you a fortune. Period. A cryptocurrency faucet is an app or website that distributes small amounts of cryptocurrencies for free. It might ask you complete small tasks and surveys in exchange for free crypto. But believe me, cryptocurrency faucets aren’t something you want to invest your time into. I personally don’t find crypto faucets worth the time.
If you have some free time you can consider earning small amounts but it won’t make you a fortune. Keep that in mind before investing your time into faucets.
