Even since Satoshi Nakamoto created Bitcoin in 2009, there’s been growing interest in cryptocurrencies, which have evolved from novelties in the digital system to trillion-dollar technologies that have the potential to disrupt traditional financial services. With highly knowledgeable people setting the stage for future regulations, there’s hope a viable system will be developed for consumers, investors, and businesses. Governments must act now to support the growth of cryptocurrency, as it can create a more decentralized and equitable economy that provides a canvas for everyone to thrive.
Mistakes are easily – and every so often – made by those just getting started with investing because they don’t do enough research, react emotionally, and don’t have a plan. Making mistakes is part of the job. You gain wisdom from errors, and they help build character. In this article, we discuss the most common investment mistakes so you know what to watch out for. While learning how to invest in cryptocurrency, it pays to learn from the worst.
Not Having Background Knowledge
Individuals fail when investing in cryptocurrency because they lack basic knowledge. Incorporate learning into your day-to-day work to open up doors that control access to opportunity and advancement – listen to podcasts, keep up to date with the cryptocurrency markets, and don’t be afraid to ask questions. Courses provide a basis for more advanced learning (you can even get a certification). If you’re getting started with large-cap cryptocurrencies, there are certain things you must be aware of, besides the Bitcoin price, so take time to refresh your knowledge before using it for any serious transaction.
Investing For the Short-Term
There are two time frames to remember: short-term and everything else. New cryptocurrency investors tend to have a short-term perspective, and while it’s possible to make money quickly, there’s the risk of losing all your funds to a bad movement. Thinking long-term encourages you to look beyond temporary market trends and fulfill your true growth potential. Create a well-diversified portfolio that provides adequate levels of risk and returns under various cryptocurrency market scenarios. You can invest in the likes of Ethereum, Cardano, Solana, Nero, and so on.
Nobody can predict the returns the cryptocurrency market will actually provide, which is why you should check your expectations against the reality of life and adjust them accordingly. In other words, don’t expect too much or use someone else’s expectations. Everything from the strategies used to the portfolio design must be in line with your objectives, so don’t focus on the latest fad or on maximizing short-term investments. You can’t predict the future, but you can take action to shape it, so increase the chances of reaching your financial goals by controlling what you can.
Taking Too Much, Too Little, Or the Wrong Risk
All investments carry some degree of risk – that is, uncertainty and/or potential loss. Bitcoin has an impressive value proposition, which means you can invest small amounts and reap huge profits, but you must be fairly risk-tolerant. Taking too much risk (or too little) can lead to making decisions that are outside your comfort zone, and it’s unlikely you’ll achieve what you want. Understand yourself and your skills for a more fulfilling investment path. If you’re an emotional investor, you may become too focused on the daily/weekly performance of the cryptocurrency market and make impulsive decisions. Dollar-cost averaging is a good way to maintain objectivity.
Forgetting Private Keys or Seed Phrases
The private key is much like a password in the sense that it’s a set of letters and numbers. This secret number is used to authorize transactions and provide ownership of cryptocurrency, allowing you to manage your funds anywhere in the world, provided you have an internet connection. On the other hand, the seed phrase stores the data required to recover your lost, stolen, or damaged wallet. It gives you the chance to recover your wallet quickly and easily on another device (or interface), even if the original provider doesn’t exist anymore.
Not surprisingly, private keys and seed phrases are hard to remember. If you lose access to your private key, you can’t use the wallet to spend, withdraw, or transfer tokens. In 2011, programmer Stefan Thomas forgot his password, which would allow him to unlock a hard drive with cryptocurrency worth billions. Now, if you lose your seed phrase, you can use your wallet to recover the funds, so transfer all the money from that wallet right away. Offline copies limit exposure to threat, but only share your seed phrase with someone you trust. Don’t leave a sticky note on your desk.
Not Monitoring Investment Performance
Very few people know for sure how their investments are doing, thinking they’ll get hassle-free results by setting up a diversified cryptocurrency portfolio, rebalancing occasionally, and getting on with their lives. It goes without saying that you must keep track of your assets and see how the performance of your overall portfolio relates to your plan. There are several portfolio trackers to help you do just that, so you’re spoilt for choice. You can make timely adjustments as needed, mitigating risks that could derail your portfolio.
The Takeaway
Buying cryptocurrency is a safe bet for your investing future, but it’s unlikely you’ll become a billionaire overnight, and this kind of wishful thinking could lead you to lose lots of money. Have realistic expectations and invest sums of money you’re comfortable with potentially losing – you can lose money even in good investments, so don’t panic and have faith in your choices. We’ve just presented the major no-nos to avoid. Making the most of cryptocurrency investing requires a bit of legwork and good habits, so play the market instead of getting rich.
Bear in mind that making mistakes is a valuable growth experience, so use that opportunity to become better at what you do. Errors can occur simply because you didn’t know better. What matters most is that you learn from past failures by taking your ego out of the equation and avoiding hindsight bias. In retrospect, things appear simple. But it’s far more complicated than it looks.