5 Mistakes New Cryptocurrency Investors Make
Published in
5 min readApr 23, 2018
So, you’re new to the cryptocurrency investing world?
New crypto investors and traders have made countless mistakes since the emergence of cryptocurrency a decade ago. If you take the time to learn from their mistakes, you can avoid costly slip-ups yourself. If you’ve already made some of these mistakes, however, don’t be too hard on yourself. It’s important to experience these setbacks in order to grow and learn, so take them in stride and move forward.
If you want to avoid the painful lessons associated with investment mishaps, avoid these common errors as you take your first steps into the market:
1. Having a nonchalant attitude towards cryptocurrency wallets
- When you create your cryptocurrency wallet, you MUST write down, or print, your public, and private keys. Save them in a very secure location and never share your private key. Do not store your passphrase on a computer or other electronic device which could get hacked or break down. There is no “Forgot My Password” option for cryptocurrency wallets. Once you’ve lost it, it’s gone.
If your computer crashes, or you dump a cup of coffee on your laptop, you can rest assured that you are able to access your wallets if you have secured your keys. Do not take this advice lightly. If ignored, you could potentially lose your entire investment and crypto portfolio.
- There are many guides online that can walk you through the process of opening a Bitcoin, Ether, or ERC20 wallet.
2. Investing more than you can afford to lose
- When investing in crypto, or any other market, it’s important to know that you can gain huge profits when your money is invested wisely — or you can lose it all in the blink of an eye.
- While it might be literally possible to make a million bucks overnight, don’t sell your car and refinance your house in order to pay for your initial investments. You could end up broke and homeless the next day.
- A responsible investor will know their weekly/monthly/yearly budget. Know your income amount, how much you pay out in bills each month, and how much you spend on entertainment and other non-necessities. Once you determine a solid budget, you should have an idea of how much you have left over for investments.
- There isn’t a universally-agreed upon percentage of income that everyone should allocate towards investments, but the recommended amount generally falls between 1 and 15% of your income. This number will be different for everyone and depends on your bills and other financial commitments. Choose your investment percentage wisely and understand that it may change from month-to-month if you’re acting responsibly.
- Start off with small investments in which you can afford a total loss. It’s better to lose a little and learn from the experience than to lose it all and have nothing to try again with.
3. Poor or inadequate research
- Going into any investment blind is a bad idea. By performing a simple web browser search, you can find a vast amount of information on any cryptocurrency that you’re interested in.
- It is important to learn about the developers, the project’s purpose, goals, and roadmap. Most of these details can be found by reading the white papers, one-pagers, and websites of crypto projects. Another good habit to develop is browsing various discussion forums and blogs related to your investment interests. Always know what you’re getting yourself into, regardless of the motivations behind your investments.
- As you move along in your crypto journey, you should become familiar with, and trust, certain information sources which resonate with you. Time is money — take some time and learn about what you are investing in.
4. Making trades based on emotion
- People are emotionally attached to the money they earn. We work hard for it and it’s valuable to us. The decisions we make regarding our funds are typically driven by our feelings and beliefs about a product or personal experience. Fear-driven decisions in the investment game can perpetuate further failures and loss. Try to keep your feelings out of it.
- Once you have invested in a crypto project, you should set yourself some goals on when to sell it, and/or when to buy more. Every single day, people make poor decisions and sell their tokens once they notice the value of their investment begin to drop… only to see it shoot up again later that day — or a few weeks down the road. Another word for a rollercoaster is Cryptocurrency. Don’t be scared by the fluctuations and get used to how it makes you feel when you see ups and downs. The sooner you can detach your feelings from your money, the better. (Remember mistake # 2 above)
- Before you place a sell order on your dropping token, take some time to think about it and stop watching the market trends for a while. Are you selling out of fear? Is your decision to sell logically sound? Or is it emotionally charged?
5. Mining new coins
- If you are new to the crypto universe, you may have heard that it is possible to “mine” new coins with your computer or smartphone. Unless you’re prepared to invest thousands of dollars in specialty mining hardware and extra electricity costs, steer clear of setting up mining rigs.
- Mining from your web browser, smartphone or other computing device uses a lot of processing resources. The more work your device performs, the slower it will process other applications, and the sooner it will develop faulty components and overheating issues.
- Try mining in your spare time if you would like. You will soon discover that your typical personal computer will only be able to mine a very small amount of crypto. Conduct further, intensive research on mining if you are serious about pursuing this option, but be prepared to shell out some serious cash for hardware and energy costs.
If you only take one thing away from this article, let it be this:
Always Remember DYOR — Do Your Own Research!
Good luck out there and happy investing!
