5 Mistakes to Avoid When Investing in Crypto

Crypto can be an exciting and profitable investment choice if you’re able to avoid the common pitfalls that some investors encounter. We’ve shortlisted 5 of the biggest mistakes that you should watch out for on your crypto investing journey.

It’s easy to find stories about individuals who have become wildly successful through investing in crypto, that’s partially thanks to the market’s low barrier to entry and partially due to the exponential growth the sector has seen. However, cryptocurrency is relatively new compared to traditional investments such as stocks and bonds, and the market is unpredictable, which is why it’s important to exercise caution and avoid making mistakes.

Spotting the warning signs can be difficult, especially if you’re a beginner, and even the most seasoned crypto enthusiasts aren’t immune to errors. Being aware of common mistakes can save you from learning a potentially costly lesson further down the line.

We’ve shortlisted 5 of the top mistakes that people make when investing in crypto and provided some tips on how you can avoid going down a similar path.

Five common crypto mistakes

1. Investing without a strategy

This is arguably the biggest factor that can prevent you from realising your full potential with crypto and cause you to lose the gains that you’ve made so far. Before you start purchasing any tokens, make sure that you’ve decided on a clear and realistic investing strategy. 

An investment strategy is essentially a plan which you set out to achieve both your financial and personal goals. Your strategy will be individual to you and depends on various factors such as your age, financial situation, personal goals and risk tolerance, which we will discuss again shortly. Having a clear strategy will ensure that you only invest in cryptocurrencies that are aligned with your future goals. It will also prevent you from making hasty decisions that are based on emotions or just copying other people’s investment choices.

However, establishing your strategy isn’t a one-time task. You should evaluate your portfolio periodically, especially if your personal situation changes, so you’re aware of what’s going well and what needs to be improved.

2. Taking on too much risk

It’s a common belief that high risk investments will reap higher returns for investors. However, returns are never guaranteed so it’s important that you only take as much risk as you’re comfortable with.

The key rule of thumb is don’t invest more money than you’re willing to lose. Like any other investment, returns are never guaranteed and the market is unpredictable. Several factors can cause coins to pump or dump at any given time so if you’re taking too much risk with the coins you’re investing in or how much you are investing, you’re more likely to make uninformed decisions based on emotion.

In other words, act responsibly when buying crypto. When the crypto market is experiencing a surge, don’t fall for FOMO (Fear Of Missing Out) and try to capitalise on the momentum if it doesn’t match your initial strategy. You should also avoid high leverage transactions, especially if you’re inexperienced. Investing strategies such as leveraged trading are extremely risky and can lead to huge losses. 

If you’re risk averse, consider dedicating more of your portfolio to established coins such as Bitcoin. On the other hand, if you have a higher risk appetite, then you may be more comfortable investing in altcoins such as Dogecoin. 

3. Failing to DYOR (Do Your Own Research)

These days you can find tips about cryptocurrency just about anywhere. But be aware that not everything you hear will be reliable and as discussed earlier, your crypto purchases should align with your personal goals. For these reasons, it’s really important that you “DYOR” before parting with your money. 

Don’t just follow trends and pump money into coins just because they’re popular online, or take the advice of influencers at face value. While their opinions may be sound, they may simply be trying to pump coins they hold in large amounts.

The other key benefit of researching crypto for yourself is that it will help you to build your knowledge of the space. Whether you’re reading blog posts or doing more in-depth analysis such as technical or on-chain analysis, by spending time looking into different cryptocurrencies, you’re developing a better understanding of the market in general which will also help you to assess potential investments more easily in the future.

4. Falling victim to crypto scams

One of the most underrated but common mistakes that individuals make when purchasing crypto is falling victim to scams. Unfortunately, crypto scams are on the rise which means that you need to be extra careful when investing your money.

There are several different types of crypto scams including fake giveaways, fake exchange scams and fake collectables and games. A successful scam can lead to criminals stealing your cryptocurrency or accessing your private wallet information.

To avoid getting caught by crypto scams, pay attention to the warning signs when you’re looking at or purchasing your crypto:

• If anyone offers you a cryptocurrency investment opportunity, don’t take it at face value – always do your own research first.
• Never share your wallet security details with anyone (e.g. your private key and seed phrase).
• Triple-check the URL of crypto-related websites you use. Scammers often replace characters in URLs in hopes that you won’t notice. For example, xc0ins.com instead of xcoins.com,
• Beware of websites that fraudulently claim to be crypto exchanges. Always check that the company holds the appropriate credentials to operate.

Remember, you can always purchase your cryptocurrency safely here at Xcoins – Xcoins’ holds a Class 3 VFA license to sell virtual assets so you can be sure you are transacting safely. You read more about us here.

5. Sharing your crypto holdings

This is one of the easiest mistakes to make, especially if you’re an active user of social media or forums.

The urge to tell the world about your gains can be high. Due to the relative infancy of the market, a lot of crypto investors lack experience, making them an easy target for criminals and scammers. No matter how comfortable you are with people you speak to online, never share your crypto balance. This includes sharing specific details about the coins and tokens that you have purchased.

While you might not be aware of it, it’s very easy for criminals to put together clues about your identity from information you share on different platforms. If these criminals are able to gather enough data about you, you may be targeted for your crypto holdings.

Bear in mind that this advice doesn’t just apply to things you share online; disclosing your crypto balance in-person, whether it’s to people you know or not, is a big no-no. In the same way that you shouldn’t share your bank balance publicly so you don’t attract the wrong type of attention, you should treat your crypto balance in the same way. 

While your bank may be able to help you recover lost or stolen funds, only you should hold the keys to your crypto, which means only you are responsible for keeping those funds safe. 

Avoiding mistakes in crypto

There’s no guaranteed way to have continued success in crypto but by taking note of these common mistakes and tips on how to avoid them, you will be better informed and better equipped to avoid these problems.

As you spend more time building your crypto portfolio and become more experienced, staying safe will become second nature and putting in the effort to keep your crypto safe will pay dividends in the long run. 

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