Huge Cryptocurrency Investment Mistakes That Need To Be Avoided
Those that were among the first that invested in Bitcoin ended up with huge returns since this crypto's value drastically rose to over $18,000, creating numerous millionaires in just under one year. However, this does not mean investing in cryptocurrency is always a success. Actually, most inexperienced investors end up losing money. This is why you should be aware of the following cryptocurrency investment pitfalls that you have to avoid at all costs.
Investing More Than You Can Afford
This is by far the most common mistake as new investors just put in way too much into Bitcoin or other cryptocurrencies. You need to learn how much to invest in cryptocurrencies and you should never invest more than you can comfortably afford to lose. Risk tolerance is something you have to learn about and you need to understand that buying crypto is not without associated risks. Although the possibility of having huge gains in the future exists, there is always the possibility of huge losses appearing. As this happens, many beginner investors just sell as they are afraid of losing more money. Such an approach is a sure recipe for failure when talking about crypto investments.
Investing Everything In One Cryptocurrency
Many beginner crypto investors just buy Bitcoin with all the money they have available. This is never a good approach. Professionals always recommend that you put your money into around 5 crypto coins and that another investment option is considered, like equities. This is important since it offers protection against the really high volatility seen in this market. Think about the fact that between December 2017 and February 2018, those that invested lost around 40 percent of the value. Cryptocurrency value is determined by different factors than what you might be used to so diversifying the investment portfolio is always a very good idea.
Lack Of Research
The inexperienced investor will be in a hurry and will not understand much about ICO and the technology behind the coins. So many scammers exist and since the market is dominated by anonymity, it is really easy to be taken advantage of.
Always conduct a good research and learn everything you can about the token or ICO you are investing in. Many trusted crypto review sites exist right now. You want to use the information they offer in order to make truly informed decisions.
Selling Out Of Panic
The cryptocurrency market is highly volatile, with huge ups and downs that can appear. In many cases these are the exact opposite of what experts predict. As slumps happen, cryptocurrency value drops. The inexperienced crypt investor will start to panic and will simply start selling what they bought in the past.
Because of the high volatility it is more important than with most other investment options to never make a decision based on sentiments. Strategic choices are absolutely necessary. If you are influenced by your emotions, it is a certainty everything will be disastrous. If the market is dropping and you feel you need to sell, just do it a few coins at once. In the event the market picks up you do not lose that much.