Crypto market is risky. Yet, it is one of the most profitable markets humanity has ever invented. How to invest in cryptocurrency so that your money was safe and you could get the most income? Let’s find out.
The hype around cryptocurrencies has become so widespread that everyone wants to invest today. Hearing of all those 10x, 20x, 100x made on some unknown meme coins can be rather disturbing. Someone is already driving a brand new Ferrari while you still go to work every day.
Why not try to succeed by yourself? It's tempting isn't it?
But mind the risks.
The amount of money actually makes no difference - besides the sum of your losses, of course - if you are unfamiliar with the basic principles of crypto finance.
The thing is that crypto has been - and still is to a certain extent - the playground for enthusiasts.
There are many things that beginners can trip over. You may not understand the crypto lingo well enough. You can become a victim of a scam. You can mess up with settings in your crypto wallet. You might accidentally send assets to a wrong crypto address.
Plenty of things can happen. And almost all of them will lead you directly to financial losses.
What can you do to avoid such troubles and how to invest in cryptocurrency with minimal risks? Let’s take a look at the most common mistakes novice investors usually make.
6 Biggest Crypto Investing Mistakes and How to Avoid Them
It’s very easy to get caught up in the hype of news headlines. Crypto mistakes are startlingly common, and below we list some of them.
Don’t buy crypto just because the price is low
Low prices can be a great seduction. Especially if the coin is falling. It is easy to think that a low price is a great bargain. While sometimes it might be true, mostly prices are low for a reason. Some cryptocurrencies are just losing popularity.
You have to try to understand if this is just a price hike and bounce or the coin is just falling at user rates.
Some cryptocurrencies are dropped by developers. Later they might be considered dead, but you can be one of those who jump at the wagon going nowhere.
Don’t go ‘all-in’ if you are not sure
Many trading platforms are eager to squeeze as much money from you as possible. To do that they always make it look like the only option is to invest as much as possible. They say it will maximize the profits, usually not mentioning that it will maximize the losses also.
You must remember betting as much as possible is a quick way to the poor house.
Crypto investing is not gambling by any means.
Do not think crypto is easy money
Nothing related to crypto can be considered as easy money. No matter how exactly you are trying to invest, be it simply buying and holding or trading, investing in crypto is just as serious a business as investing in stocks or commodities like silver and gold.
If you meet someone who says something different you should understand he or she is probably trying to trick you into making crypto mistakes.
Do not fall into scams
Please remember, the more attractive the deal looks, the more potentially dangerous it is.
Most of the scammers use the attractiveness of the deal as their main weapon.
For instance you might receive an email with an “investment opportunity” promising huge income or telling you that if you send them crypto they will double or triple the amount.
Offers of free money should always be viewed with great skepticism.
As well as the opportunities with less known tokens that suddenly skyrocket. One day someone will come to you pointing at a coin that is gaining 200% a week. That might sound like a great chance to invest.
But criminals often easily inflate or deflate the price of very small or unknown cryptocurrencies. There are cases with scammers pre-mining some currency, then skyrocketing it to sell all they have got at the peak to somebody like you, who thinks this coin will still rise.
You have to be very careful before buying some crypto you have never heard of.
There is also a huge problem with crypto wallets. While there are a large number of famous and well respected wallets, such as Ledger, Exodus, Edge, MetaMask, there are plenty of less known entities. Most of them reside in the App Store and Google Play.
Every once in a while you can hear stories of some wallet stealing assets from the users.
You can avoid that by carefully choosing a wallet to trust your assets.
Don’t forget or lose your crypto keyphrase
No matter how carefully you have chosen the wallet, if it is custodian or hardware, then you are the only keeper of the secret keyphrase.
Forgetting your keyphrase is like losing the keys to a bank vault. Without your keyphrase, all your cryptos will be irretrievable.
Best crypto wallets always remind you to keep the keyphrase safe, but many users don’t pay much attention. And it is also important to notice that the keyphrase should be stored offline. Not in your email where it could be easily stolen from.
Send crypto only to verified addresses
The address is crucial to the way cryptocurrencies work.
Sending assets to a wrong address will in most cases result in their irretrievable loss. Most wallets will remind you to double check the address when you send the assets. But still it is you and only you who is reliable for the final result. Crypto addresses are long and tricky, so it is always safer to copy and paste them rather than type them in.
But sending to a wrong address is a potential mistake not only because of the misprints.
There is another danger. You can send crypto to the wrong network.
It is not likely to happen when you are sending crypto that uses just one network or a few that are interchangeable. But if you are sending, for example, a stablecoin like Tether (USDT) you must be extremely careful.
Tether could be sent via different blockchains and if you send it to the wrong one, the coins will be lost forever.
Large exchanges like Coinbase have built systems to protect users from such mistakes. You can simply send crypto to a user chosen by his username rather than his wallet’s address. And the exchange’s software will automatically define the correct network to transfer the coins to the appropriate wallet that belongs to that user. Of course, such a technology brings another danger as you might send your crypto to a wrong username.
So careful checking of the address or a username of the recipient is of paramount importance. Check everything twice before sending crypto.
Takeaways
Crypto is no easy game. It might give you enormous, almost marvelous opportunities to get rich. But it can also be a source of great disappointments.
Be careful making important decisions. Don't fall into scams and don't think crypto is easy money.