TOP 5 most common Cryptocurrency mistakes
Cryptocurrency trading has continued to attract lots of investors as more people are now starting to show interest. While this is a positive development, there are common mistakes young investors will need to watch out for as they can end up causing them thousands of dollars’ worth of cryptocurrency. Being aware of this common mistake can minimize the level of risk throughout your cryptocurrency trading.
Investing money you can’t afford to lose
Most beginners and young investors coming into the Crypto World fall into this mistake. They thought if they had invested a few years back, they would have been a potential billionaire by now thereby feeling guilty with the thought that “it’s already too late”.
Then they begin to obtain loans and engage in various financial debts due to their need to become a sudden billionaire through cryptocurrency. This is a horrible idea as young investors may end up selling up their cryptocurrency in the long run just to cover the cost of their debts.
Beginners and young investors should ensure they invest a small portion of their earning. The money should be what they can afford to lose, and not money they have emotional connections to. If your total earning is $10,000, using $1,000 to invest is not a bad idea.
A lot of young investors are impatient when investing in cryptocurrency. They don’t want to invest in a long-term. They often procrastinate by aiming to invest on long-term and few months of their investment; they noticed that all other cryptocurrencies are going up except the ones they invested in, then they change to buy the other rising cryptocurrency. After this had happened, their previous cryptocurrency begins to move up. This act is very prominent among young investors, and it’s quite annoying. You should never be greedy because cryptocurrency investment gives a maximum return on investment when compared to other forms of investment like the stock market. Young investors should learn to be patient and invest the money you can afford to lose.
Lack of decision, strategy and being too emotional
Some people invest in cryptocurrency just to get more money. However, getting more money is not the aim of cryptocurrency. Young investors should not be too emotional. Define your goal and strategies on how you deal with your crypto project. For instance; if your goal is to invest on IOTA at $4level, you should decide the gain level you intend to sell, or year(s) you plan to sell. Deciding on a particular strategy would allow you to breakthrough.
Young investors also fail to decide whether the purpose of their investment is for a short term or long and whether the aim is to accumulate more coin or dollar. They are unable to realize that bitcoin and dollar values are two different things. There are situations where the price of bitcoin rises, falls or remain steady. You may gain a lot of money in $ value and end up losing in bitcoin value since BTC also goes up and down.
Some young investors are too emotional thereby buying more cryptocurrencies when the price of the one they invested in suddenly goes down. If you lose money presently on a project, be calm. Price rises and falls; wait for the period that the price will go up and avoid trying to break-even by investing in another project. Don’t make a risky investment because you lost on a project. Stick to your plan and never be emotional.
Young investors get stuck since they don’t know what they are doing. They end up losing, swapping BTC when its rises faster than the $ value. Young investors should note that if the $ value rises greater than the bitcoin value, they are gaining and if the bitcoin value increases faster than the dollar value when the dollar value goes up, they are losing. If the purpose of your investment is for a short time or you are a day trader, accumulating more bitcoin would be a better strategy. However, if your goal is for long-term investment, accumulating more dollar value is a better decision to make.
Lack of research
Most young investors don’t believe in Crypto investment. They invested because their friends told them to invest in a particular cryptocurrency with the aim to sell once the price goes up. They failed to do their background research to know more about the project, and once the value of the particular cryptocurrency they invested slightly goes down, they tend to sell their coin since they don’t know what is going on in the market coupled with their disbelief.
Young investors should endeavor to do their research; seeking expertise knowledge is not a bad idea. They should understand that most of the Crypto based projects are not yet finished. As young investors, they need to know the aims of the crypto developers and their promises to investors. By doing background research, you will be able to know more about the development team, their ideas, and whether they can be able to achieve well enough to deliver their promises.
Proper research would broaden your knowledge to be able to roughly estimate what kind of dollar or bitcoin value the cryptocurrency can hit. Doing thorough research on NEM for instance, you can roughly deduce the maximum dollar value it can hit, and this won’t allow you to sell at 5 cents or $2.
Lack of diversification
Most Crypto Investors keeps their eggs in one bag whereas diversification is the key to a successful cryptocurrency investment. Investing in more than one cryptocurrency will enable investors to diversify their portfolio to be more stable for gains and losses when there is sudden fall in one of the crypto coin. There should be a minimum of 5 different cryptocurrencies in investor’s portfolio. Investors should also endeavor to split their cryptocurrency in the market caps. Splitting in high, middle and lower cap is a good strategy. Young investors should avoid investing in bitcoin only.
Buying cryptocurrency on a “FOMO” and selling on FOUD”
Most young investors buy cryptocurrency on Fear of Missing Out (FOMO) and sell due to Fear of Uncertainty and Doubt (FOUD). Within 23rd of October to 4th of December 2017, the price of IOTA was moving steadily at about $0.2 and began to rise suddenly. Most young investors felt they were missing out and started to buy while some bought when the price was at its peak. Eventually, the price relaxed a bit for a specific period before an undulated movement.
Young investors should be aware that there are people in the crypto space making money by causing panic on the crypto market since that is what they are paid to do. They will basically be buying from people that are afraid. If you don’t believe in your project, you will end up selling to them at FOUD.