The price of Bitcoin is one of the most debatable Twitter topics in recent years. Along with it, other digital assets become more and more popular.
Thus, many people have become aware of cryptocurrencies and consider them an investment opportunity. However, the more crypto becomes popular, the more mistakes people make while purchasing it.
So, in this article, you’ll learn the top 5 mistakes to avoid when you decide to buy cryptocurrency.
Top 5 mistakes while buying cryptocurrency
1. Lack of research
Have you heard about DYOR? DYOR stands for “Do Your Own Research” which is crucial when investing in cryptocurrencies. Without proper research, you may make impulsive and uninformed decisions that can lead to significant losses.
So it’s essential to investigate the cryptocurrency to buy, including understanding their price trends and underlying technology. It helps you identify potential risks and rewards, aligning with your investment goals and risk tolerance.
Also, ensure that you get information from legitimate and trustworthy sources, and gradually you will learn how to distinguish between reliable and unreliable sources.
2. No crypto exchange platform check
Using an unreliable exchange can lead to a significant loss of funds. So, where to buy cryptocurrency is a crucial question for every trader. Choose only reputable exchanges with good reviews and security features.
Reputable exchanges have a proven track record of ensuring their customers’ security using robust security measures., such as two-factor authentication and encryption.
They also provide a user-friendly platform and offer prompt customer support. Here are the main criteria to consider while choosing the crypto exchange:
- Security measures: The most crucial security measures include two-factor authentication, robust protection against phishing scams, attacks, and other theft attempts, biometric login support, and adherence to KYC standards.
- The number of trading pairs: The most popular coins, such as Bitcoin or Ethereum, are present on most exchanges. Therefore, if you are an investor looking for more exotic assets, look for platforms that offer many pairs. There will likely be both the most popular and not very well-known coins.
- The fiat currencies option: For users looking to exchange fiat currency for cryptocurrency, decentralized exchanges are not a viable option. In this situation, selecting between various centralized exchanges (CEX) and peer-to-peer (P2P) platforms will depend on the availability of the specific fiat currency required.
- The fees amount: All cryptocurrency exchange transactions incur fees. For instance, WhiteBIT, a centralized exchange (CEX), charges transaction fees of 0.1% or less. Keep in mind that fees may vary within the same platform, depending on the transaction type.
- Passive earning possibility: In addition to selling digital assets, many platforms implement reward programs to boost user profits. The terms and bonuses vary depending on the exchange. Some platforms also provide the option to open crypto deposits. For instance, some exchanges offer interest-bearing crypto deposits with rates ranging from 0.3% to 24.85% on specific assets.
3. No portfolio diversity
To reduce risk and increase profit through cryptocurrency buying, diversify your portfolio by investing in various cryptocurrencies and other assets. Avoid investing in just one coin, as it can lead to losses if it crashes.
Your investment strategy should align with your trading style, risk tolerance, and goals. It is recommended to have a mix of large, stable cryptocurrencies and smaller ones by market cap.
An 80/20 blend of large-cap to mid-to-small-cap is ideal for beginners in cryptocurrency buying. A diversified portfolio can include BTC, ETH, leading altcoins such as DASH, LTC, and XMR, and small-cap coins such as TVK and FMG.
However, don’t avoid spreading thin over different assets and investing in too many small-cap altcoins. Instead, start with small-medium amounts of Bitcoin and Ethereum in cryptocurrency buying, and add other altcoins. First, however, remember the DYOR.
4. Trading based on FOMO
FOMO, or Fear Of Missing Out, focuses on limited-time-only opportunities, which can cause you to make hasty investment decisions. To combat FOMO:
- Create a trading strategy with rules that limit allowable losses and profits for each coin you invest in.
- Stick to your game plan during market fluctuations, as new crypto opportunities arise daily.
- Remember, investing is a marathon, not a race. There will always be other chances to invest.
5. Too complicated trading strategy
Newcomers to the world of cryptocurrency may be lured into adopting overly complex trading strategies recommended by influencers and “crypto-experts,” which can result in significant financial losses and a negative outlook on crypto.
However, understanding the analysis of conditional orders and the dynamics of crypto markets requires time and effort. Plus, investing based on your research and knowledge is always better than implying other people’s experience.
Investing in crypto, however, doesn’t need to be complicated. You can grow your portfolio by adopting simple strategies, such as dollar-cost averaging, similar to traditional investments. In addition, active trading and constant monitoring of crypto charts are optional for success.
How to buy and trade cryptocurrencies?
Before diving into the world of cryptocurrencies, it is essential to identify the best ones to invest in based on several factors:
- Development team’s experience: A strong and experienced development team is crucial for a successful cryptocurrency project. Research the background and expertise of the team members to assess their ability to deliver on the project’s goals.
- Project’s roadmap: The roadmap of a cryptocurrency project provides insight into its future plans and milestones. A well-defined and realistic roadmap can indicate a project’s potential for growth and long-term success.
- The technology behind the project: Investigate the technology and blockchain platform used by the project. A solid technical foundation with unique features and innovative solutions can set a cryptocurrency apart from its competitors.
- Regulation issues: Stay informed about the regulatory environment surrounding cryptocurrencies, as this can impact their long-term viability. Be cautious about investing in projects that may face legal challenges or are operating in a grey area.
- Market trends: Monitor market trends and sentiment to gauge the overall trajectory of the cryptocurrency market. This can help you make informed decisions about when to buy or sell specific cryptocurrencies.
Determine how to store your crypto
Once you buy a cryptocurrency, a digital wallet is required to store, send, and receive cryptocurrencies. Choose a wallet that supports the cryptocurrency you want to buy and trade.
Wallets come in various forms, including hardware, software, and mobile applications. Prioritize security when selecting a wallet, and consider using a cold wallet (offline) for long-term storage.
Choose a reliable crypto exchange and a trading strategy.
Sign up for an account with a reputable cryptocurrency exchange, which allows you to buy, sell, and trade various cryptocurrencies. Some popular exchanges include Coinbase, Binance, and Kraken.
Research the exchange’s fees, available cryptocurrencies, security features, and user reviews before making your choice.
After acquiring your chosen cryptocurrency, you can trade it for other digital assets on the exchange. Trading typically involves analyzing market trends, setting up buy and sell orders, and monitoring price movements. Beginners can start with simple trades, while more experienced traders may explore advanced trading strategies and techniques.
Here are some examples of the most popular trading strategies:
- Day trading: Buying and selling assets within the same trading day.
- Copy trading: Replicating the trades of another trader or investor.
- Scalping: Making quick trades to profit from small price movements.
- HODLing: Holding onto assets for an extended period, regardless of price changes.
- Swing trading: Holding onto assets for a few days or weeks to take advantage of price swings.
- Crypto range trading: Buying assets when the price is low and selling when it’s high within a specific range.
- Crypto arbitrage: Profiting from the price differences between different exchanges or platforms.
In conclusion, for those who are new to the world of crypto, investing in it can seem like a scare-off task. However, by knowing about the common mistakes, you can become a more self-assured investor and prevent yourself from suffering financial losses due to a lack of expertise.
So, instead of feeling overwhelmed, follow these tips to invest in crypto confidently and avoid pricey errors.
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