Avoid These Common Mistakes When Investing In Cryptocurrency
By the end of 2021, there were 300 million global crypto users. With more than 8,000 cryptocurrencies available on the market today and 400,000 transactions daily, we are now witnessing our friends, acquaintances or even family members investing heavily into the digital currency with the hopes of high profits.
It is very easy for anyone to get caught up in the entire scenario – especially when there are headlines going in the favor of cryptocurrency. However, at the same time, there are very high chances of you making the most common mistakes that a lot of people have already made while investing in cryptocurrency.
To save you from the trouble of losing money, we are here to enlighten you about all of the crypto mistakes that experts suggest to avoid by all means.
1. Don’t Take Big Risks
There is no doubt in the news that some cryptos have given phenomenal returns to investors in the past few years. There were staggering numbers associated with cryptocurrencies like dogecoin, ethereum, etc which together lured more people into investing more of their money.
While bigger risks often lead to bigger returns, experts suggest to not get carried away with these numbers; especially if you are a beginner. It is often advised to invest the amount which you can easily afford to lose later.
Even if you are someone with a high risk appetite, it is better to trade with small amounts e.g not more than 2% of your overall portfolio in cryptos. Once you get thoroughly familiar with how the values of cryptocurrencies fluctuate, only then you should take more risks.
Beginners can practice trading through platforms like the bitcoin era website as it offers a system that goes right according to various trading preferences and risk levels. Moreover, users can take advantage of demo-trading, live-auto trading and support for fiat currencies to get one going.
2. Don’t Fall For Scams
Unfortunately, multiple scams are happening all around the internet.
In recent times, fraudsters have begun to contact victims via email or text with an “investment opportunity”. In the messages, they promise victims about doubling or tripling their investments once they send their cryptocurrency to a designated digital wallet.
Avoid any such communication by all means.
The Spoofing Techniques
Bad actors can easily inflate or deflate the price of relatively small or unknown cryptocurrencies. They also create fake buy or sell orders that make the value of certain cryptocurrencies go up by 100 percent at times.
When traders see such an option, they try to jump into investing. But that is when criminals cancel the orders, which of course they were never going to fulfill and this crashes the price as well.
Some criminals also own a lot of low-end cryptocurrencies because they pre-mine in large quantities before making it available to the general public.
Furthermore, there are criminals who hike up the price by promoting their currency on social media. They sell it at a higher price on the crypto exchanges and then disappear with the money.
Malicious Crypto Wallets
Crypto experts will always advise you to rely on big names when it comes to crypto wallets, such as Ledger, Trezor, Exodus or MetaMask. Hence, don’t even think about going for Dodgy or unknown wallets on Google Play Store or the App Store as they often come with shady codes to steal your crypto funds.
Don’t even think about investing in fake coins as criminals use it as the most popular medium to steal your identity and hard-earned money as well. They often persuade you to click on links that they send in emails, only to install spyware on your computers.
Before selecting a coin, do your research and always prefer bluechips, mid-caps and penny coins.
3. Don’t Think Crypto Is Easy Money
Going by the fundamentals of trading any kind of financial assets, it doesn’t matter whether you own stocks, commodities, or cryptocurrency, there is no guarantee of easy money. If you have people telling you about crypto currency as an easy way to make money, then they are definitely not providing you credible information.
4. Not Knowing Key Crypto Phrases
With so many jargons out there in the crypto world, it can be hard to remember all of them. However, knowing the lingo is important to avoid any chances of scams.
This combination of the words “alternative” and “coin” refers to any cryptocurrency other than bitcoin.
To bet on the price to go down instead of a rise.
A cryptocurrency fork stands for a split in a blockchain. This takes place due to a disagreement between developers on how to organize the blockchain. Back in 2017, bitcoin also forked into bitcoin and bitcoin cash.
The initial coin offering is the price at which the new crytos are sold to the investors for the very first time.
Margin trading occurs when investors borrow money to bet more on a cryptocurrency. Be very careful as margin trading can lead to massive losses when the trade doesn’t go your way.
People mine or create cryptocurrencies to compete for rewards in the form of newly minted crypto. In such scenarios, cloud mining takes help of remote data centers that share the processing power to cut the cost of mining.
There are a lot of cloud mining companies doing scams by offering easy cloud-mining rewards. All of the top currencies require a great amount of computing power.
Bull markets and bear markets
Taken from the traditional stock market, a bull market refers to traders who are confident about a particular investment. This means that they will keep buying and prices will continue to go up. In a bear market, traders are not certain and prices fall drastically.
Pretty much like the “stop loss” concept, a sell order is an instruction that traders give to the platform to sell their cryptocurrency once the price reaches a certain level.
An order book presents a list of all the traders available on a particular cryptocurrency exchange who are willing to buy or sell cryptocurrency for a particular price.