Most of you must have heard about the surging cryptocurrencies. You would have heard a lot about a lot of coins and their prices soaring these days.
The increasing prices are giving much higher returns or profits than any other traditional financial investment tool. This has made cryptocurrency a lucrative option for investments.
Mistakes to avoid investing in Cryptocurrency
There is too much information available over the internet to learn about cryptocurrencies. But is knowing enough? Knowing what needs to be done is just half of the process. You should know what not to do or what to avoid doing.
Cryptocurrency is extensively used to apply for car finance loans with bad credit with an instant decision provided on applying. Hence it is even more critical to understand the mistakes you might make while investing in cryptocurrency.
There are some obvious to be avoided purchases like not buying a coin just because a celebrity is promoting it or a coin which is meme-based and must background to it etc.
But there are other less apparent mistakes that you must be aware of before investing. Avoid these simple mistakes to get better results from crypto investing.
Avoiding mistakes
1. Buying At an All-Time High
With the soaring prices of cryptocurrencies, people are investing heavily in them. This soars the prices further. And the fear of missing out on the rising tide makes more people invest in it. Suppose you have already invested in the rising tide, good. If not, then wait and watch.
Investing at the high tide or an all-time high is one of the common mistakes done by investors. It happens because of the feeling of missing out on the opportunity.
And when you invest at a higher price, and the price correction happens, you get panic. The low’s in price trend usually make you panic-stricken and sell the holdings. This puts you under heavy losses rather than profits.
Volatility is the other name of the cryptocurrency market. It soars high in no time and drops the similar way. The drops are sometimes as low as 50% in just a few days.
So do not just invest because everyone is investing, and you will miss out. If you think you are late and have missed the tide, wait for the next one to come.
Systematic periodic investing is one of the ways to tackle the volatility of prices. Keep investing a certain amount each month. Slightly increasing the investment is the prices are lower and decrease if prices are higher. It is just like the SIP investment strategy.
2. Not doing the research before investing
In the world of cryptocurrency, literally, anyone can create their own cryptocurrency. Umpteen currencies are running, opening, and closing every month. Many of them are not even real but fake.
They are there to ride the rising wave of crypto and reap profits, and then vanish from the market.
Make sure to do the research before you start investing in a particular cryptocurrency. Read its white paper and check for the news related to that coin at some reputable exchange. Check what the future plans of the currency are.
Avoid making the investment in the currency basis the hype created in the market. Or because someone in your family has purchased it or someone has suggested buying it.
Do not just invest in something which is being talked about by everyone. Have your strategy in place to select and invest in a currency.
3. Investing More Than You Can Afford
In a bull market where returns are quite high, it is tempting to throw all your investment or saving into the cryptocurrency. But you need to remember is that this market is new and highly volatile.
Cryptocurrency is such a lucrative and seems an easy option for your unsecured loans. People take a lot of unsecured loans for bad credit through cryptocurrency, even more than their appetite to repay it.
Being a cautious and conservative investor in a market like a cryptocurrency is advisable. Not being tempted and investing what all you have is the mistake you need to avoid. It is better to invest in smaller amounts or not apportion a significant part of your savings into cryptocurrency. Invest according to your risk appetite.
4. Not Securing Your Investments Properly
Security is one of the unique selling points (USP) of cryptocurrency. That is because of the technology it is based on, which is ‘blockchain’. But the security of your assets (currency coins) is one of the essential things to consider.
Using a reputable and famous exchange like Binance, Coinbase or Kracken is one way to be safe with your transactions. Another is using a proper web wallet that totally belongs to you.
Some security tips for your crypto trading:
- Always use a strong password for the website.
- Always use two-factor authentication for your cryptocurrency applications
- Make sure your phone has the appropriate security measures so that the apps cannot be easily accessed.
- Do not check your portfolio or login into an exchange through unsecured or public networks.
5. Investing Only in Crypto
One of the critical rules in investing is to diversify your portfolio. Putting all your savings or investments into cryptocurrency is not the right decision.
No matter how lucrative or high returns it gives, do not miss on diversifying the other financial investment tools. Consider stocks, mutual funds, bonds etc. Real estate is can also be an option of investment.
7. Transferring to the Wrong Address
One of the significant mistakes any crypto investor can make is to transfer to the wrong address.
By nature, the cryptocurrency transaction is permanent and irreversible. This means once the transaction is done, it cannot be reversed.
And to top it, there isn’t any customer care to reach or any regulatory body to approach. Once the transaction is done, there is no way possible to undo it.
One way is to be more cautious. Whenever you make large amounts of transactions, it is better to make a small one first to know that the fund is reaching the correct address. Once the smaller one is successful, then you do the larger amount transaction.
Conclusion
Cryptocurrency is the new, high return giving financial investment tool in the market. But with high returns comes increased risks. The lucrative returns of the cryptocurrency market have shadowed the high volatile nature of cryptocurrency.
Since everyone is talking, investing or at least talking about cryptocurrency tempts you to invest in it. But there are a few mistakes you should be aware of and avoid to play safely in the highly volatile cryptocurrency market.
Emma Anderson is a financial advisor at Quickloanslender who always believes in researching hard to know her clients’ financial problems. She takes the time to understand their financial wants and needs to write the blogs on them as the solutions. In her long 14 years of experience, she has written plenty of blogs on the financial and business sectors of the UK.
Emma Anderson has been recognised for her work in financial planning and her blogs are regularly published in the website of Quickloanslender. As far as her educational qualification is concerned, she has done Masters in Accounting and Finance, and done PG Diploma in Creative Writing.
