7 common crypto investor mistakes and tips to avoid them

7 COMMON CRYPTO INVESTOR MISTAKES AND TIPS TO AVOID THEM

WELCOME The crypto currency market is like a raging river with its rapidly changing and highly volatile environment. Unfortunately, if you swim against the current, you are likely to make a lot of rookie mistakes that could wipe out your investing capital quickly. There was a time when people were very wary of investing in crypto currency and in some respects that is still the case. However, recent gains and more media coverage have attracted a new crop of investors, growing the market to more than half a trillion in the past year. A lot of people are taking a chance and embracing this exciting new market, and

others are mistaking it for a get-rich-quick scheme. The unfortunate news is that not everybody is making money. Any investor can agree that mistakes are part of the learning process, but some newbie’s are making mistakes that can be easily avoided. In order to improve your trading skills and your market understanding, it is always better to learn from the mistakes of others.

you to increase your portfolio relatively quickly. So with that in mind, what follows in the next pages are 7 common crypto investor mistakes, as well as tips on how to avoid them and their damaging impact on your long term wealth building in the crypto markets.

If you want to invest in the long term, then holding is the safest strategy. However, casual trading or day trading can be very profitable in the short term. This can help

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MISTAKE #1 Fear of Missing Out (FOMO) Everybody wants to make huge profits. However, there will be days when you will look at your computer screen and see green candles and huge bull runs, and you will want to trade so badly. There will also be times when you sell a coin and the price immediately sky-rockets. Regardless of how sad and frustrated you may feel, do not let your emotions spur you into purchasing such a coin on this basis. The fear of missing out on huge profits is understandable. However, you cannot enter a trade based on the assumption that the bull-run will go on long enough for you to get a portion of the profits. There’s

a big chance that this FOMO will cost you dearly. There’s also a possibility you may purchase at the top, and experience a huge drop in price afterward. It is important to realize that the crypto currency market is extremely volatile. It is affected by lots of FOMO events, big whales’ moves, and pumps and dumps. The volatility can work for you or against you. If you are switched on and have a sound strategy, the volatility could make you very rich. However, if you are a slave to your emotions and your fear of missing out, it could leave you penniless.

TIP TO AVOID THIS As with every type of investment, keep your emotions in check. Never enter a hasty trade without a strategy. It is important to learn how to read the charts of coins so as to set up an entry point, an exit point, and a target point. Furthermore, if you missed out on a profitable trade, let it go. Also be sure to cut your losses quickly and move on.


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MISTAKE #2 Leaving currency sitting with exchanges and not moving them to independent wallets With currencies like the dollar or the pound, you can store your money in a bank. It is quite straightforward. However, with digital currencies, things work a little differently. There is a lot of convenience with leaving your currency sitting with an exchange. Unfortunately, these exchanges are a huge target for hacking attempts, and their entire database could be stolen. The exchange could also run away with your money or go bankrupt. Unlike a bank, the crypto currency exchanges are not currently regulated.

This means that you have little recourse against them if your coins disappear while under their care. Millions of dollars worth of coins have been lost because an investor trusted all their crypto coins with an exchange that crashed or was compromised. TIP TO AVOID THIS So where do you store your crypto coins instead? In a wallet designed specifically for crypto coins.

key. The public key allows you to send coins to other users. The private key is like a password that shows you own a public key. There are different types of wallets, including mobile and desktop wallets, online wallets, hardware wallets, and paper wallets. Wallets are a lot safer than exchanges, though it is still advisable to always have backups of all your records to avoid losing your coins.

A wallet is an address on the block chain. Each wallet has a public key and a private


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MISTAKE #3 Entering the wrong public keys in crypto-wallets when exchanging In order to understand how crypto wallets work, it is better to think of them as email accounts. Your email account helps you receive and send emails. Your crypto wallet is similar; as it helps you send and receive crypto coins.

transactions. It does this by verifying the transaction based on a special signature created from the private key. 5. It broadcasts and shares all this information with the block chain network.

The crypto wallet does five things in particular:

If a crypto wallet is like an email account, then the address is like an email address. The public key makes it possible for you to send coins to other users. However, make sure you have the right address before sending the digital coins.

1. It helps create private keys. 2. It helps create public keys derived from the private keys. 3. It generates an address from the public keys. 4. It sends crypto coins by approving

wrong address, it will be difficult, if not impossible, to get your coins back. TIP TO AVOID THIS Slow down. This is easier said than done, especially when emotions are high and you really want to make a purchase or a sale. However, rushing through the process without double or triple checking everything could result in significant losses.

Double and triple check if you have to. This is because if you enter a


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MISTAKE #4 Not doing your own research There is no shortage of Twitter experts and Telegram traders out there. There are a lot of people across all social mediums who claim to have insider knowledge of which coins will ‘moon’ soon and give you thousands of dollars in profit. Some of them are legitimate, and they know what they are talking about. Unfortunately, there are others who are paid promoters or people with fake accounts. There are some fake experts who are members of pump and dump groups that try to create fake hype around coins to promote FOMO in order to

encourage people to purchase the coins they are selling. This is why it is so important to do your own research. At the end of the day, you are purchasing these coins with your hardearned money. You need to understand the coin, its utility and its value, instead of relying entirely on so-called experts to tell you when to buy and when to sell.

TIP TO AVOID THIS Learn more about what a crypto-coin does and try to understand how the price moves. Conduct research to help you know at what stage of development the coin is at. Never run blindly into a trade just because you see a pump, as you could lose all your money in the process.


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MISTAKE #5 Not holding your private keys securely and not keeping backup records Private keys have been an important part of crypto currencies since their first introduction in 2008. An understanding of how private keys work can help you keep your coins secure and prevent loss of funds.

For example, Catherine wants to pay Brian using a crypto currency coin. She has to create a transaction identifying Brian as the payee. She also has to publish this transaction on the crypto currency’s network.

Crypto currencies such as Bitcoin are secure electronic cash systems that basically run a messaging system built on the internet. Instead of sending texts and emails, the crypto currency network relays value transfer messages known as transactions. Private keys help to authenticate these messages and allow users to identify each other.

From the start, she faces two problems: 1. She has to identify herself and Brian in the transaction. She cannot get information from a government registry because this creates a central point of control, which is the very thing crypto currencies were designed to eliminate.

2. She has to do all this in a way that makes it difficult for others to change her transactions or forge transactions in her name. Crypto currencies solve both problems through the key cryptography system. A public key identifies both the recipient and sender, and can be sent to others. A private key works with the public key to create an unforgettable signature. To prevent forgery, all transactions must contain this digital signature. Since the public key can be given to others, anyone who gets their hands on the private key


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MISTAKE #5 cont Not holding your private keys securely and not keeping backup records can access your wallet and steal your funds. Therefore, your private key must be held securely always. Thieves can use many avenues to steal your keys. There is also malware that specifically targets crypto currencies. This is why you must exercise extreme caution when storing or transmitting your keys.

no way to reclaim your crypto currency without it. Therefore, it is important to always have a good backup of all of your records. In fact, have two or three. Backup your records offsite and onsite. However, make sure that no one gets access to these backups either so that your private key remains secure.

TIP TO AVOID THIS The unfortunate reality is because of how wallets work, if you lose your private key, you lose your money. Your reasons for losing the key do not matter, as there is


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MISTAKE #6 Selling too soon or too late This is one of the most agonizing decisions in crypto investing. Should you leave your coins untouched and risk losing everything, or should you cash in now and walk out while you can still make a profit? There are people who sell their coins early due to the Fear, Uncertainty and Doubt (FUD). Panic selling is very common among newbie investors who, when faced with a sudden drop, quickly sell their coins to ‘cut their losses’. However, they fail to realize that crypto currencies are very volatile and that prices can drop one day and increase the next. Therefore, selling prematurely

due to fear could result in a loss. Because the crypto currency market is unregulated, it has attracted a lot of scammers. There are people who are paid to cause panic in the market in order to buy coins from scared investors. If you let your emotions determine when you sell or buy, you will sell lucrative coins due to FUD. On the other side of the spectrum, there are people who are guilty of selling their coins too late. While it is true that there are many people who have made millions of dollars from crypto investing,

excessive greed could cause you to lose all your money. TIP TO AVOID THIS Always do your own research. Do not simply listen to naysayers who claim that a crypto currency’s price is on its way down. Don’t panic and sell your coins because all your friends are selling. Understand how the market works, and let your research guide your decision to sell. To avoid getting greedy, always have a strategy when investing in crypto


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MISTAKE #6 cont Selling too soon or too late currencies. Know what your goal is, and sell your coins once you achieve it. Granted, there are times you will see the prices going higher after you’ve already gotten your profits. However, as a trader, you should expect this. One effective strategy to help with this is to sell your coins in stages as opposed to selling all of them at a go. This way, you can still get your profits while having the chance to ride any surge higher.


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MISTAKE #7 Lack of patience When it comes to crypto investing, patience is definitely a virtue. Some investors are very eager to make money quickly and join the ranks of crypto currency millionaires. What they fail to realize is that a lot of people who have made millions from crypto currencies have invested in them for years.

profitable. After they sell their coins, the crypto currency they purchase begins to go down, and the one they sold begins to rise. If you are not patient, you will keep chasing after such profits, only to incur losses.

A rookie investor may purchase coins, and then realize that all the other crypto currencies are going up except the one they invested in. If they are not patient, they may be tempted to sell the crypto currency they have and purchase a crypto currency they believe is more

The answer to this one is quite straightforward. Be patient. Even though the price of a crypto currency may be going down, it is important to remember that you do not lose money until you actually sell your coins. Most coins bounce back in days, if not hours. Follow the

news and always stay up to date with the latest development in the crypto currency market. This ensures that you always know when to buy and when to sell.

TIP TO AVOID THIS


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IN SUMMARY In order to achieve success as a crypto investor, you need to combine technical analysis with fundamental rules of investing. Going in a trade blind is never advisable. You may get lucky a few times and make money, but in the long run, you are more likely to lose your investment. Always do your own research. Enter a trade with a strategy so that you know how much profit you want to make and how much risk you are willing to take. It is also important to know that crypto currencies are constantly evolving and

changing. Even popular crypto currencies such as Bitcoin have good days and some really rough ones. Furthermore, there are new opportunities coming up every day. Be patient and do not fall for any hype. Analyze the markets, follow the news, and chart price movements to determine when to invest. Above all, security is key. Understand how the public keys and private keys work to ensure you do not lose your hard-earned money. Treat your private key the same way you treat your ATM PIN number.

Never share these details with anybody. Slow down when making every transaction to ensure you enter the right public key. Even after following these tips, you may still make a few mistakes in the beginning. However, the key is to learn from your mistakes so that you do not keep repeating them. If you follow all these tips, you’ll have a higher chance of surviving and thriving in this high-paced and exciting market.


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