Considering Crypto? Don’t Make These 10 Costly Mistakes!
Between nearly $100B locked in DeFi, NFTs selling for over $60M, and Global Market Insights predicting the cryptocurrency market cap to surpass $1.8B by 2027 — crypto is booming.
If you just woke up to the world of cryptocurrency and are looking to sink your teeth into some speculation, it would be wise to be cognizant of the risks beforehand. Don’t worry, BTC, ETH, PROB, they all have plenty more growing to do, so take your time and peruse these mistakes, so you don’t have to make them.
1. Security is King
The cryptocurrency space has had its fair share of unfortunate press regarding hacks and breaches. ProBit Exchange is one of the only exchanges in Korea not to fall victim to a data breach. This is not by chance and can be attributed to security measures from the get-go, including cold wallet storage and top-tier security infrastructure.
Security is invariably an essential consideration, especially in the world of cryptocurrency. It is paramount that you take the time to ensure that your chosen exchange is reliable and secure. ProBit Exchange is ahead of the game, storing 95% of user funds in cold wallets and recently securing the ISMS Certification.
What is the ISMS Certification? The Korean Internet & Security Agency (KISA) awards the ISMS certification to organizations that successfully meet over 104 stringent control requirements. An organization that successfully achieves this certification can be trusted to consistently and effectively secure YOUR information and financial assets.
Read more about the significance of the ISMS Certification here and why it SHOULD matter to you.
2. Buying only BTC
In the traditional financial world, investors balance portfolios with uncorrelated blue-chip and non-blue chip shares — crypto portfolios are no different. Suppose your portfolio consists solely of BTC and ETH; although weakening with ETHs recent rapid growth, these tokens have significant price correlation and can result in a poorly balanced portfolio.
In short, diversification manages risk through exposure to as many different areas as possible. Leveraging sector diversification is a full-proof method to manage your trading risk and can be easily compartmentalized into five categories.
3. Risk Tolerance
Risk tolerance is an often overlooked aspect of trading, but it is critical to address. You don’t want to lose sleep because your tokens are always top of mind. The psychological aspect of trading can be a tough one to master.
Despite this, there are many ways you can gain more confidence in your token picks. To start, invest some time into paper trading applications like Tradingview, where you can simulate the trading experience with “fake” money.
Not only do these training applications get you familiar with the trading interface, but they let you see the results of your trading decisions. Derive confidence from practice, a well-diversified portfolio, due diligence, and extensive self-directed research. If you put in the time and effort, you can trust your decisions, but always have an exit plan in mind.
4. Not leveraging trading tools or a stop loss
Both beginner and experienced traders may fall prey to letting their emotions dictate their trading activity, often refusing to accept losses and move on quickly. This failure is one of the primary reasons traders lose large sums of money. Traders have made this mistake time and time again; you don’t have to. Set a stop loss.
At ProBit Exchange, we are constantly on the lookout for new innovative integrations with our trading platform to elevate the trading experience for our community. ProBit Exchange’s most recent integration is with Hummingbot, open-source software that provides algorithmic trading centred on automated market-making bots and should not be ignored.
5. Trusting the Grape Vine
It can be tempting to take your friend’s word for a token or follow the advice of a stranger in a Reddit forum but don’t do it. Unfortunately, scammers still saturate the cryptocurrency space; protected by anonymity, they will do everything in their power to separate you from your tokens.
If your gut is saying a proposition is too good to be true, it’s worth a second look and a deeper dive.
6. Falling Victim to Volatility
Between January 6–12, BTC fluctuated from $34,000 to $42,000 and then plummeted to 32,000. All within six days. Crypto is riskier than many other investment vehicles and comes with wild volatility. The market will be enjoying a surreal bull run in one moment while a painful correction looms on the horizon.
Get your game plan set in stone before you buy. If you commit to a well-thought-out trading strategy before you trade, you will have enhanced mental resilience in times of wild volatility.
7. FOMO Driven Decisions
A damaging mistake typically made by new traders is FOMOing into a red hot token. Making a trade solely because you are envious of the gains others have made and expecting continued upward growth is a massive blunder. It is vital to remember that more trading opportunities will surface in the future, and trading on gut instinct will leave you feeling queasy.
If you discover a rapidly growing project organically through news or a friend, it may already be too late. Consulting a price chart and seeing 150% gains on the day is not research and could leave you with substantial losses from pumpers or a dying project.
Know what you are buying. Don’t succumb to the social and psychological pressures that you may be missing out.
8. Exit Scams
Luckily, ProBit Exchange users don’t have to worry too much about this crucial mistake. Before purchasing a house, you would likely visit it and ensure no glaring concerns with the property exist. You should practice similar levels of vigilance in your token research; it is your money, after all.
ProBit Exchange performs an ample amount of due diligence, ensuring our community that only the most promising and lucrative opportunities are enabled through our platform. Much of the risk of possibly buying into a scam can be remediated with ProBit Exchange.
9. Following the Herd
You may have noticed some overlap within this top 10, but it is for a good reason. Blindly following the herd without conducting any due diligence is one of the most frequently committed trading errors. While experienced technical traders may have already vacated the trade, enjoyed some profit, and headed for the hills, you may be stranded with a dying token.
Following calls on Twitter or WSB should be taken with a grain of salt. Just because a forum has substantial upvotes, likes, comments should not bolster its perceived legitimacy. When finances are involved, people will go to great lengths to uphold a facade to manipulate you.
Take tokens that are being raved about as a research opportunity. Define a project persona based on rapidly growing token characteristics that can help you smell out future opportunities BEFORE the herd.
10. Investing More than You Can Lose
Trading is difficult but losing money is exceptionally more taxing. Much of the crypto space’s allure is its capabilities to reward traders life-changing money in a heartbeat. This same volatility can lead to many traders’ financial demise.
Don’t be Sean Russel. Sean put all his savings into BTC and, at the first sign of a loss, traded it for Bitcoin Cash, XRP, and ETH. Unfortunately, Sean’s efforts failed, leaving him with a 96% loss. What can we learn from these mistakes?
Seans’ losses are not a product of the cryptocurrency sphere or the projects that Sean had in his portfolio. This is a consequence of numerous trading mistakes. Understand the project, stick to your plan, trade without emotional impulses, diversify, know when to sell, and most importantly, play with what you can lose.
There is a lot of money to be made in cryptocurrency. Don’t let these risks scare you away from the scene; it’s an exciting place to be. If you learn proper trading and risk management fundamentals and remember these ten critical mistakes, you will be better off than most.