As far as markets go, the world of cryptocurrency is still young and incredibly unpredictable. No matter your strategy, theres always going to be some inherent risk, especially with an investment type as new as this.
That said, there are plenty of common mistakes in crypto trading that are highly avoidable as well. Some of the mistakes below are more particular to cryptocurrency trading while others are common to all kinds of investments. Knowing these common mistakes will hopefully help you avoid many of the traps that have ensnared so many rookie crypto traders.
Mistake #1: Forgetting Your Wallet Password
You might not think that it could happen to you, but there are now thousands of people locked out of their crypto wallets because of this one fundamental mistake. Many have had to live with the knowledge that their accounts contain the equivalent of millions of dollars worth of coins that they may very well never have access to ever again.
Always make sure you have a secure way of remembering passwords, not just to your wallets but the device it’s hosted on as well. Your Monero wallet may be highly secure, but you should also be responsible when it comes to handling your credentials if you want to be able to access your coins in the future.
Mistake #2: Not Having Long-term Goals
As with any investment, its important to have a specific, actionable set of goals when it comes to blockchains like Monero. In turn, these goals should be aligned with your overall long-term financial objectives.
Without any long-term goals, you may be swayed by fickle market sentiment more than your specific best interest. For example, you may start buying or selling just because everyone else is doing so, even if its not necessarily something you might want to do, just yet. With long-term goals, you can be more selective about the opportunities that come your way.
Mistake #3: Buying into Just Any Crypto
This goes back to the previous point. Not all cryptos are made equal. If anything, some are completely worthless or are simply bad bets. Buying into a specific coin type or mining it just because the opportunity presents itself is often a one-way ticket to a very bad time.
Mistake #4: Being Sloppy with Your Tracking
Being diligent with tracking cryptocurrency exchange rates is critical if you want to make informed decisions. While you dont always need to be tracking it every hour, youll want to check periodically to make sure youre able to address a potential crisis or opportunity early on.
Mistake #5: Putting All Your Eggs in One Basket
As with all investments, you probably dont want to pin all your hopes on just one cryptocurrency. Spreading things around a bit will allow you to minimize potential losses should one or more of the cryptos fall in value.
To expand on this idea further, you shouldnt limit yourself to just cryptocurrencies either. If your objective is to grow your net worth then investments in stocks, bonds, money markets, startups, and even local businesses should also be looked into.
Mistake #6: Over-Diversification
Investing in too many different cryptos at once is also a fairly common mistake. Too many investments can be hard to track and make effective decisions on. Additionally, over-diversification can slow down the growth of your investments value by tying up cash in cryptos that arent easily exchanged or have limited growth.
Mistake #7: Not Having a Healthy Amount of Skepticism
As we alluded to earlier, not every so-called opportunity is one worth taking. Not only do you have to contend with potential scams and dead ends, but you may also be exposed to true believers who really do think that their chosen crypto or investment strategy is the way to go.
Emotions run high in the world of crypto, even relative to other markets. You will find no shortage of honest albeit deluded or misinformed folks who will lead you astray. As with many other things in life that sound too good to be true, its important to maintain a healthy amount of skepticism.
Mistake #8: Associating Low Prices with Bargains
Conventional wisdom tells you to buy low and sell high. Realistically, opportunities to do so are rare with cryptocurrencies worth investing in. Oftentimes, prices are low for a good reason. Always take a breather to consider why any investment youre considering is going at their current rate.
Mistake #9: Following Just One Opinion
Even the most reliable thought leaders in crypto are wrong at least some of the time. On the flip side, fringe opinions can sometimes be right on the money. Listening to a variety of opinions on crypto and comparing it all to what you can observe yourself can be a good way to build a nuanced understanding of the market.
Mistake #10: Investing More Than You Can Afford to Lose
This means that investments, at least initially, should only be extra cash that you have on hand. The same thing holds true whether youre investing in crypto or any other market. You never want to be in a position where a freak event, no matter how unlikely, wipes out your entire net worth.
Hopefully, weve helped you avoid some of the most basic mistakes we see in crypto trading today. While these arent the only errors you can make, keeping these in mind should help you off to a good start. As you learn more about blockchains, you can begin to veer away from these basic ideas and carve your own path. Good luck!