5 Common Mistakes When Investing In Crypto That Lead To Big Losses

April 11, 2024

Crypto investing appeals to many individuals, and for good reasons, as it presents unique opportunities.

However, it also comes with substantial risks you don’t find in traditional markets, such as technical complexity, significant volatility, and regulatory uncertainty. All these things can overwhelm beginner investors – and often lead to costly mistakes that affect their financial well-being and mental health.

Succeeding in crypto investing is all about implementing prudent strategies and building discipline, as this will help you make big profits over time. On the other hand, those who dream of “getting rich overnight” will likely end up losing their money because they lack a long-term investment strategy. According to binance, it’s essential to check real-time ETH price as part of a successful investing journey, because prices tend to fluctuate rapidly and you want to determine when is the right time to buy. The truth is that the crypto world can be messy and must be approached carefully. But we’ve got your back; in this blog, we provide a list of 5 mistakes that investors make and that you should obviously avoid so that your crypto journey is as smooth as possible. Let’s explore them!

Mistake No.1: Not taking the time to understand the basics

If you’re new to crypto, it’s pretty natural to be eager to trade as soon as possible. We get it! Still, you shouldn’t rush the process. It’s important to first educate yourself on digital assets and how they work, as this will help you build a successful trading strategy. You need to understand what inflation is, the difference between circulating and total supply, as well as other concepts related to crypto, such as wallets, exchanges, and private and public keys, to name just a few.

If you don’t know these basic things, you’ll find yourself struggling to figure out the right course of action. Hence, before you trade your first coin, take the time to get prepared for your crypto journey – luckily, there are plenty of useful resources that will help you learn all the fundamentals of crypto investing, so take advantage of them.

Mistake No.2: Not writing down a crypto investing plan

If you aren’t careful, you can easily lose your judgment when navigating the crypto space. Many investors do that, succumbing to fear and greed, which are the two greatest enemies when investing in cryptocurrency. Once an investor sees their portfolio hitting an all-time high, they want more because they feel like another greater opportunity could boost their wealth even further. So, they become greedy and let this emotion guide their actions.

Similarly, when the price of a coin experiences a dramatic decrease, investors hold until 0 many times due to stubbornness. Neither of these actions is effective – in fact, they can negatively impact your portfolio. To avoid this, it’s essential to write down an investment plan, and stick with it throughout your crypto journey. Doing so will help you make more rational decisions aligned with your financial goals.

Mistake No.3: Not diversifying (or over-diversifying) your portfolio

You may already have heard it, but we’ll say it again: don’t put all your eggs in one basket. That’s simply not wise. Instead, make sure to diversify your portfolio: every skilled investor hedges and you should do the same to minimize risks. If you take the time to observe how coins behave in the market, you will likely notice that some of them tend to correlate. Namely, when one experiences a price increase, the other sees a dramatic dip. In such a situation, it can be smart to invest in both if you like the futures of both coins, keeping your investment safer.

While not diversifying is a mistake you want to avoid, so is over-diversification. You don’t want to go overboard with the coins you add to your portfolio because it would be hard to track them all. Remember, if you want to succeed with your crypto investments, one of the most essential things you must do is keep up with the news and price movements. So, we recommend diversifying responsibly – it’s up to you how many coins you think you can keep track of, but we recommend a maximum of 10 (and a minimum of 5).

Mistake No.4: Investing your life savings

The most important rule is NEVER to invest more than you can afford to lose. When investing in crypto, you should be aware of the fact that you can lose the money you put in. You need to be realistic, and there’s a good chance that this will happen often throughout your investing journey. When the prices of digital assets go up and down dramatically, you should stay calm and have enough money to live your life comfortably.

There are many stories about people who borrow a lot of money to invest in crypto or put their entire life savings into it, and hearing such stories indeed sends shivers down your spine! This is one of the biggest mistakes you can make when investing in crypto – and it can have devastating consequences on your life. So, don’t ever do such a thing. Before investing in crypto, put your finances in order and ensure that even if you lose money, that won’t take a toll on your financial health. This is important, so don’t overlook it.

Mistake No.5: Becoming emotionally attached to your coins

Do you know what’s one of the worst things that you can do when investing in crypto? Letting emotions control your decisions. While emotions play an important role in your life, they aren’t your friends when it comes to investing.

Emotional investing is why many investors face significant losses – they no longer use their logic and buy at market tops and sell at bottoms. But this is a recipe for disaster. You need to develop awareness of your emotions and learn to control them before they control you. Remember, staying calm is the secret to navigating the crypto space effectively. Yes – in such a chaotic market, that’s what you need to do to stand a chance of making profits. Nothing good comes from panicking; if you allow negativity to get to you, you’ll only make poor decisions. Ideally, you should disconnect from your crypto investments from time to time and focus on other areas of your life. This will help you stay clear-headed and achieve better results in your investing journey.

The bottom line

There you have it: a list of 5 common mistakes you should avoid when starting crypto investing. Most of them are common sense, so it will be easy to remember them. Your job is to develop self-awareness, which will help you boost your profits and safely navigate the crypto world.

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