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The allure of the crypto market is undeniable, with its borderless nature, speed, and simplicity attracting investors all over the world who seek to build long-term wealth. However, it’s worth noting that as exciting as it is, this industry can be quite complex, and new investors can easily fall into common traps when diving into the world of crypto assets and can lose money due to poor security practices, a lack of knowledge about how the industry works, and much more.
If you’re considering getting into cryptocurrency, read on as we will dive into the most common mistakes investors make so that you can avoid them and maximize your chances of success.
Mistake no 1: Believing crypto are only Bitcoin and Ethereum
Many investors wonder how to buy eth or BTC and they make the mistake of believing that all crypto are Bitcoin and Ethereum, especially due to the media coverage the crypto leader receives. While Bitcoin and Ethereum undoubtedly deserve all the attention they get, investors should know that thousands of other coins are available, each with a unique value proposition, like stablecoins.
Choosing a crypto to invest in requires careful consideration to ensure you make an informed decision, so take the time to consider your purpose (why you’re investing in a specific project and what you expect to gain from it) and carefully research the project to make sure you genuinely understand how it works.
Mistake no 2: Having an unrealistic perception of the market
Due to its high return potential as well as the way it upends the financial sector, a lot of buzz surrounds the cryptocurrency landscape, but the truth is that not all of it is entirely reliable or applicable. You may have heard from someone that crypto is a godsend that can offer a triple-digit return in a relatively short time, but the reality is quite different. While it’s true that, in some instances, cryptocurrencies can generate substantial returns, that’s not always the case, and it’s essential to keep your expectations realistic and not believe everything you read (or hear) about this industry.
Instead, look for reputable sources to educate yourself on cryptocurrencies and their future, or consider seeking support from crypto industry experts to answer questions you have about the market.
Mistake no 3: Adopting a short-term approach
Here’s the thing: getting rich quickly isn’t possible, not even with cryptocurrencies, but unfortunately, many investors buy into this idea and adopt a short-term approach, which is, in general, a bad investment move. Why? It’s simple – investors succumb to FOMO and make decisions without considering the consequences. The truth is that crypto is no magic wand that will turn you into a billionaire overnight – just like any other asset class out there, it demands a robust strategy and clear goals.
On the flip side, a long-term investment mindset makes choosing the right crypto investments easier because you are more focused on selecting high-quality projects with a long track record. Instead of trying to become a billionaire in 90 days ( which could quickly make you lose everything), it’s always better to view crypto investing as a multiyear process and focus on gradually building a thoughtful portfolio.
Mistake no 4: Forgetting crypto passwords
Security is of the utmost importance when investing in crypto, and while buying a coin directly and keeping it in a wallet makes it impossible to be stolen, it’s always possible to lose the key ( thus, the password) and never have access to the funds anymore. Does it sound like a nightmare? Unfortunately, it’s often the reality for investors who have lost the passcode to a wallet worth hundreds of millions of dollars.
It’s a disaster indeed, but it’s possible to prevent it if you’re careful with the password and ensure you won’t lose it. The trickiest part is to balance the password’s security with its memorability, and while this will mainly depend on your unique preferences and needs, an idea is to record the password on paper ( but this is also risky because someone could find it) or use a password manager.
Mistake no 5: Investing in only one digital currency
While Bitcoin fans refuse to deviate from their preferred coin, this isn’t the smartest way to invest in cryptocurrency, as it contradicts the golden rule of the market: diversification. Just as with any other type of investment, it’s not a good idea to invest 100% in one single thing because you risk losing all your money if that particular investment fails.
Luckily, plenty of coins are available, and as long as you research them and spread your investment across multiple options, your crypto portfolio will be safe and won’t tumble because of a coin’s slip.
Mistake no 6: Ignoring fees and taxes
Crypto investing isn’t free, as investors face tax rules they cannot afford to ignore. Unfortunately, many crypto newbies do so, and as a consequence, they face subsequent penalties and audits. It’s essential to open a crypto IRA account and understand precisely the taxes you must pay and the time you must pay them.
Furthermore, every crypto exchange charges a specific amount of fees, which can range from blockchain fees and transaction fees to gas fees. These fees can dramatically differ depending on when investors access the network, so it’s essential to do the research and gain clarity on this aspect.
Start crypto investing off on the right foot by avoiding these mistakes
Investing in crypto can feel exciting, but don’t let excitement cloud your judgment. If you’re just starting, you must do your homework and avoid blindly trusting the Internet. It’s your money on the line; therefore, you must remember to stay disciplined no matter what happens in the market. The good news is that implementing a few strategies that allow you to manage risks and being mindful of your emotions can make a tremendous difference in your investing journey, so don’t overlook their importance in your crypto journey.
