Home Cryptocurrency 10 Huge Crypto Investment Mistakes And How To Remain Cautious
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The cryptocurrency market is highly volatile and could be a ground for huge investment losses when you handle it carelessly. Despite the alluring posts of 100x potential returns on crypto investments, some common mistakes could bring you down instead of the potential high profits. 

Therefore, completing thorough research before investing in any crypto project is part of the key moves to avoid falling for scams and rug pulls. This article covers 10 huge crypto investing mistakes and how you can avoid them.

It explores how investors should deploy strategic investment approaches and risk management techniques to overcome emotional investment decisions centered on greed and fear.

Keep reading!

Cryptocurrencies and The Increased Adoption

 

The cryptocurrency industry is one of the fastest-growing ones in the global economy. The first crypto token, Bitcoin, was launched in January 2009.

In 2013, Forbes announced Bitcoin as the best investment asset, while Bloomberg declared BTC the worst investment in 2014. But this year, 2023, data shows that the industry currently has over 200 million crypto assets. 

Also, the crypto market is valued at over $1.04 trillion today, September 11, 2023, and remains highly volatile with exciting additions in its historic growth. 

Meanwhile, due to the growing risks and scams through crypto investments, the FBI closed the crypto-based darknet black markets.  Also, the US Securities and Exchange Commission (SEC) tightened its regulatory approach towards crypto, leading to incessant lawsuits.

Due to the volatility of cryptocurrencies, investors must deploy strategic measures in the market. This will help them to avoid common mistakes in crypto investment. 

10 Common Crypto Investing Mistakes and How to Avoid Them

  • Lack of Personal Research

The increasing adoption of cryptocurrencies brought the rise of related scams, fraud, and hacks. Moreover, several crypto project developers conceal details about them and only avail little information to the public. 

Moreover, several crypto projects now use prominent figures, celebrities, and influencers as promotional aids for boost. With exaggerated high ROI, such as 100x potential profits or more, such crypto project influencers could deceive you into making uninformed decisions.

One of the popular statements in the crypto space for investors is to ‘do your own research’ (DYOR). This is because some investors dive into crypto investment without proper knowledge or research about the asset.

Therefore, you should always find out the genuineness of crypto projects or tokens before selecting them as your investment options. Always take a deep look into the functionalities and operations of crypto, search for reviews from existing investors, and monitor the price trend of the coin. 

In most cases, its past historical data, tokenomics, and roadmaps would provide relevant guides to fish out potential scams and fraud. But you can’t rely on social media posts as most are fake and traps to lure investors into them.

  • Joining in Rug Pulls

It’s important that you understand the rising flood of fake and rug-pull crypto tokens within the crypto space. Rug pull is a crypto scam in which the creators of a project disappear with investors’ funds, leaving the asset to crash. 

In a rug pull, the users are left with a crypto coin they can’t sell or swap for other assets. With time, the price of the rug-pulled asset will plummet, creating a massive loss for investors.

The simplicity and handy technological tools make it easy for any developer to create a crypto project for fraudulent purposes. You should not be deceived by the inclusion of a website in a crypto project, as rug pulls have well-developed websites with a laid-out project roadmap. 

By ignorantly joining a rug pull, you will be left with a crypto coin you can’t liquidate, losing all your invested funds. Most scams are always newly- minted coins with impressive high price surges within 24 hours.

Notably, the project scammers try to lure ignorant investors using FOMO. To avoid a rug pull, always ensure that you research and prove the authenticity of a crypto project, its website, and social media platforms.

Also, always confirm the age of crypto projects and be very careful investing in recently created ones. Check the trading and market liquidity of crypto tokens using tools like DEX Screener. This will help you to discover suspicious projects with low liquidity and pausable trades.

  • Indifference About Diversification

According to Chainalysis report, over $3.8 billion of crypto assets were lost through hacks in 2022. The risks are increasing daily, even as advanced technology and innovations increase.

Notably, all crypto investment has associated risks. But while some assets come with higher risk potential, others have quite low-risk implications for investors. 

When it comes to strategic crypto investment and focus on potential higher profits, diversification plays a major role. Through diversification, you will invest in different crypto protocols and control your level of risk exposure.

Diversification is a great investment strategy that enables you to navigate the highly volatile crypto market. This is because putting all funds into a single crypto project gives a high exposure to the market’s uncertainty.

Additionally, diversification helps you to maintain stability in your overall investment portfolio. Your profits in one set of investments will aid in offsetting losses from another, making your funds safe, secure, and stable.  

  • Engaging in Emotional Decision-Making

Relying on your emotions for investment decisions could be quite harmful and detrimental to any potential success. Factors influencing investment decisions include greed and fear, which could also apply to cryptocurrency.  

Emotional decision-making could trigger some investors to accumulate during market highs and dispose at market lows. Notably, the crypto space is flooded with several projects that reflect and promise 100x or more potential gains. 

The developers of such crypto assets sometimes utilize social media influencers to push their scams as one of the hottest and trending projects. Greed could prompt investors to skip due diligence and thorough research and dive into fake crypto assets.

Before the reality dawns on them, the project could be rug pulled, or all their funds could be lost. Similarly, the fear of missing out (FOMO) on what appears to be a huge investment opportunity could become an investor’s nightmare through massive losses. 

As such, you must remove all forms of emotional attachment before investing in crypto assets. 

  • Not Paying Attention to Risk Management

In virtual currency trading, neglecting risk management tools like stop-loss and buy-limit orders is a grave oversight. These tools have been crafted over decades of experience in managing risk in various asset markets.

As such, it’ll be wise to incorporate them into your strategies to shield yourself from lock-in profits and market volatility. Let’s consider a stop-loss order, for instance. It automatically sells your tokens if they dip below a predetermined price.

Similarly, buy-limit orders ensure you don’t pay more than a specific price for a token. Fortunately, these tools are user-friendly and can seamlessly integrate into your crypto trading approach.

  • Inability to Decide When to Leave The Market

Imagine you’ve invested in a promising cryptocurrency at a favorable price and on a continuous upward trajectory. The value keeps climbing, and you’re left wondering, “What should I do now?”

While every new trader dreams of such a scenario, many find themselves unsure of how to navigate it when it occurs. Often, they hold onto their asset for too long, hoping it will become the next Bitcoin. But eventually, it crashes, erasing all their profits.

Failing to define your trading goals and limits exposes you to unnecessary risks. In that case, you must have clear objectives, such as how much profit you aim to make and at what point you’ll cut your losses, in mind before buying any crypto asset.

Notably, two significant aspects you must know as a crypto trader are mastering your emotions and maintaining composure, especially when faced with high-pressure situations.

If you’re a HODLer or a long-term investor, having an exit strategy might not seem as crucial. However, if you’re actively trading during market fluctuations, it’s highly recommended to establish a well-defined exit plan.

Selling your assets and securing profits as they increase, rather than all at once, is an excellent strategy to ensure you capture immediate gains. These profits can then be reinvested when the market conditions are favorable.

  • Neglecting DeFi and Non-Custodial Wallets

It’s highly recommended that crypto investors transfer their tokens from accounts managed by centralized corporations to their own non-custodial wallets. This is particularly crucial considering the incident of “not your keys, not your crypto” that resonated strongly in 2022.

At the time, several crypto investors faced losses when prominent centralized exchanges and lending platforms faced insolvency. Notably, customers of Celsius, FTX, Voyager, BlockFi, and Gemini Earn are still grappling with attempts to recover their crypto holdings.

For those seeking higher yields, exploring decentralized finance (DeFi) protocols such as Aave and Uniswap offers the opportunity to earn interest on crypto deposits. Nevertheless, it’s crucial to emphasize the importance of conducting your own research (DYOR) before engaging with DeFi applications.

  • Mistakes With Crypto Wallet Operations

Crypto wallets serve as your gateway to the world of digital currencies, acting as your vaults for which you bear sole responsibility. So, as a crypto investor, it’s vital to protect the private keys and recovery phrases that grant access to your wallet.

For the highest level of wallet security, consider using hardware wallets, also known as cold wallets. One common pitfall that crypto investors encounter is the unintentional mistyping of wallet addresses. 

Whether you’re sending tokens to yourself or a friend, ensuring they reach the correct wallet address is critical, as even a minor typo can result in permanent loss of funds.

  • Falling Victim To Cryptocurrency Scams

In the virtual currency space, scams are a persistent concern, given the growing number of corrupt players in the system. Shockingly, according to the Federal Trade Commission (FTC), a staggering sum of approximately $700 million in cryptocurrency assets were lost to theft in 2021 alone.

These malicious actors employ sophisticated tactics, often using phishing methods to infiltrate your digital currency wallet and persuade you to transfer your assets to their own wallet.

Crypto scams can manifest through various channels, such as emails or messaging applications, with perpetrators masquerading as kind entities acting in your best interests. Notably, wallet security can be compromised by a seemingly innocent act – connecting your online wallet to an application and granting it access to your funds. 

While this action is a standard procedure for many cryptocurrency applications, scammers can exploit it to siphon off the funds from your cryptocurrency wallet. You could fall into their traps if you have little or no knowledge about these strategies.

So, to shield yourself from these individuals, you must never connect your online wallet to an untrusted application. Additionally, it is advisable to store most of your cryptocurrency assets in offline hardware wallets, away from the reach of cybercriminals.

Equally important, never disclose your seed phrase, wallet password, or private keys to anyone, as these are your ultimate safeguards against cryptocurrency theft.

  • Searching for the Next Big Token Like Bitcoin or Ethereum

In the ever-evolving world of cryptocurrencies, there’s a constant hunt for the next big thing – a replica of the sudden rise of Bitcoin and Ethereum that turned ordinary individuals into overnight millionaires over the past decade.

Although such opportunities still exist, solely depending on discovering the next Bitcoin or a coin with a 1000X multiplier may not be the wisest approach to entering the realm of crypto trading.

Undoubtedly, the cryptocurrency market offers significant profit potential, yet novice traders must recognize that most crypto projects falter before gaining substantial traction.

Today, the crypto landscape boasts a multitude of alternative coins (altcoins), with each project competing for the title of the next breakthrough. However, it’s essential to exercise caution because not every contender will achieve that distinction.

While unexpected windfalls do occur and individuals occasionally amass wealth overnight, if your goal is to minimize risk and craft a sustainable result, it’s advisable to reconsider going all-in on the prospect of a 1000X coin.

Conclusion

Navigating the world of cryptocurrency investments can be quite overwhelming, particularly for newcomers to the scene. However, steering clear of these pitfalls can shield you from significant financial losses from a lack of expertise and boost your confidence as an investor.

Don’t forget to prioritize security and diversify your portfolio when dealing with crypto wallets. Above all, do not invest funds you can’t afford to lose.

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Asad Gilani Crypto Editor

Asad Gilani Crypto Editor