7 common mistakes a beginner should avoid making while investing in cryptocurrency

We are all very familiar with the quote ” with great power comes great responsibility “. If we have to use this quote in the field of cryptocurrency, it will be rephrased as ” great rewards come with great risks “. Cryptocurrency is extremely volatile. It can make you a millionaire and a bankrupt both depending on how few or how many mistakes you make while investing.

Every human being makes mistakes whether in career or personal life. It doesn’t matter if the person is a pro or a beginner. However, if you (as a starter) know some common mistakes others make, you can avoid them and avert any setback to a great extent. We look at 7 common mistakes a beginner should avoid making while investing in cryptocurrency.

Not buying low and selling high

This is a fairly obvious mistake yet majority of beginners fail to realize it and go ahead making it anyway. They fail to recognize when is the best time to buy a digital currency. As a result, beginners buy something at a price which they think is low and then hope for the prices to rise so that they can sell high but end up selling it lower than the price they actually bought it for.

A lot of people bought Bitcoin when it was valued at $ 15,000. The prices fell and traders started selling it off before the price can go further down instead of waiting. As a result of massive sell off, the price went down to $ 7,000 and even 5,800. Now the price of a Bitcoin is around $ 60,000.

Therefore, it is vital to recognize the moment.

All or nothing buys

Inexperienced traders make the mistake of selling everything at once or not selling anything at all even when there is an appropriate time to sell. First one shows impatience while the second case shows greed.

The best way to avoid this mistake is by selling the assets in limited amount. That’s where experience counts. A trader who is not new sells a certain portion of his/her asset instead of selling everything at once. For example, if they see a scope of selling, they sell 10% or 15% of their assets, then sell something in similar amount the next time and so on.

That way they continue making more profits.

Investing in only one coin

What is the probability of a coin giving you the best returns making you rich? It is either 0% or 100%. Since you are investing your hard earned money into something, having 0% probability of getting successful is extremely frightening.

Instead, smartly invest in more than just one coin. For example, if you are investing in 5 different coins and if one of them goes to the moon, you will make more than enough to cover up for the losses in other coins, if there is one. The probability of success is more than 0% in this case.

Putting everything on one exchange

If you are storing your assets on hot wallets, i.e, online wallets, you are already taking a risk. Hot wallets are always susceptible to cyber attacks and there have been cases of people losing all their funds due to hacking in the past.

However, there are certain advantages of storing the digital funds online. Those wallet exchanges offer interest which is too lucrative to look beyond. Hence, it is understandable why people want to store cryptocurrency online. But even then, it is more advisable to store your funds in more than one wallets so that even if you lose one, you don’t lose all of your belongings.

Investing more than they can afford to lose

When you go to a gym, you see posters which say ” push your limits “. While that works great for your body there, it is important to forget that quote once you step out of it. A wise person always invests the amount which he/she can afford to lose. An unwise man however, pushes the limits. He invests more that he can afford to lose.

In that scenario, people start thinking from their hearts instead of their brains since their lives depend on the outcome of the investment they just made. When you take emotional decisions, you are bound to make some horrible mistakes.

Emotional decisions

The previous point leads us to our next point. It might be debatable in other aspects of life but when it comes to smart investments, the best trader is the trader without any emotions. Someone who doesn’t get phased by momentarily 300% increase or 80% price fall and can see the benefits and losses in the long term is the kind of trader you must thrive to become.

Not following DYOR

A lot of time people get influenced by all the hype they see regarding a coin and end up regretting later. When you intend to invest in a coin, other than just checking the market cap and volume, check for the substantial improvement in technology of that coin over time. It is imperative to do your own research (DYOR) instead of trusting someone else’s opinion completely.

This is how OneCoin managed to scam a lot of people. The entire system was based on pyramid structure. In this structure, people have to add more people to the network, making it a chain to get their rewards. People invested their money only on the basis of word of mouth. Onecoin turned out to be the biggest Ponzi scheme in cryptocurrency.

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