Are you looking for new investments and have your eye on cryptocurrency? With the cryptocurrency market expected to reach a value of $23.3 billion by 2023, cryptocurrency is a great choice. There’s more innovation in the blockchain space than in many other technology projects today.
Before you start investing in crypto, you need to understand the errors in cryptocurrency investing that you can make. Keep reading to learn seven errors you need to avoid at all costs.
1. Not Learning About the Tech
Yes, it’s tempting to invest in something because it sounds cool and seems promising. The problem is that blockchain technology is complicated and not easy to understand if you don’t do any research yourself.
If you don’t put any effort into learning about how cryptocurrency works, you won’t know anything about what you’re buying. How will you determine which coin is good if you don’t know how they work?
You don’t have to become an expert in blockchain technology, but you should understand how it works. This knowledge will help you learn more about the coins you invest in and make better decisions.
2. Storing All Your Coins on a Central Exchange
The cryptocurrency industry has a common saying: not your wallet, not your coins.
That means that if you don’t have control over your cryptocurrency wallet keys, you don’t actually own the coins you have on central exchanges. That’s because a central authority can come in and take your coins whenever they want.
While a reputable exchange won’t do this, you never know when a company will suffer a security breach. All your cryptocurrency is at risk if you hold it on a single exchange.
It’s smarter to move the coins you aren’t trading to a private cryptocurrency wallet. Nobody can steal your cryptocurrency if they don’t have access to your private keys.
3. Only Buying One Coin
There’s a big temptation for some crypto investors to go all-in on one coin. They see the coin’s creator promising the world and believe what they say. The problem is that many promises in the crypto space don’t get delivered.
You need to diversify your risk to see success investing in crypto. When you spread out your investments, you’ll get winners and losers. In many cases, you’ll make a return on investment on the coins that do well in your portfolio.
When investing, come up with a list of coins to see which ones have the most potential. Of course, you can stick with the big coins like Bitcoin and Ethereum if you don’t want to spend a lot of time speculating on new projects.
4. Panic Selling in Down Markets
The cryptocurrency market is very volatile, so it’s not uncommon to experience drastic price changes over short periods. Unfortunately, new investors will panic during this period and sell their coins. The problem is that they sell for lower than they purchased the coin for and take a loss.
Most of the established cryptocurrency coins bounce back over time. If you hold on to your investment instead of panic selling, the chances are good that you’ll end up not losing money.
Try not to let your emotions control your trading and avoid selling at a loss when the market takes a hit.
5. Not Taking Advantage of Earning Opportunities
Cryptocurrency has come a long way since Bitcoin first came out. You don’t only need to hold on to your holdings anymore. You can now put your cryptocurrency coins to work by taking advantage of money-making opportunities.
One of the most popular ways to do this is with staking. Proof of stake is a different form of validating cryptocurrency transactions instead of mining. You deposit your coins to a server and participate in a staking pool that validates transactions.
You get rewarded for doing this by getting a portion of the transaction fees. As time goes on, you can continue earning rewards, reinvesting your profits, and growing your cryptocurrency holdings.
6. Not Having an Exit Plan
Having a lot of cryptocurrency holdings is all well and good. However, what happens when you need access to quick cash and have no way to withdraw your holdings quickly?
That’s why having an exit plan is essential. For some people, that means taking profits over time as they continue to grow their holdings. For others, that means using tools that allow them to spend their holdings without withdrawing them to a bank account.
Whether you use a Bitcoin machine or cryptocurrency credit card, see what options you have for using your cryptocurrency.
7. Trying to Time the Market
With so much volatility in the cryptocurrency market, it’s tempting to try to buy as low as you can and sell high. While some people may be able to get lucky and pull it off, most people don’t. They end up buying at the wrong time and missing out on potential gains.
It’s smarter to gradually buy what you want over time instead of timing a buy and putting as much money in as you can at once. Going this route means you get exposure at all pricing levels. In most cases, you’ll end up making more money with dollar-cost averaging than finding a low entry point.
Don’t Make the Common Errors in Cryptocurrency Investing
There is a lot of money to make in cryptocurrency, but it’s just as easy to lose everything you put in. That’s why it’s essential to learn the common errors in cryptocurrency investing before you get started. The more you inform yourself, the better your crypto investing strategy will be.
Are you interested in learning about more ways to invest your money? Check out the blog for more investing tips.