Most of us have put a foot wrong here and there when it comes to cryptocurrency investing and who can blame us? We’re in new, unregulated territory, with no real precedent to follow.
However, if you’re looking to get rich quick, playing with money you can’t afford to lose, or buying cryptocurrency with a hot head, you’re setting yourself up for a fall. So, before you decide on the next coin to add to your portfolio, be sure to avoid these top five cryptocurrency investing mistakes.
Succumbing to FUD
Even for a seasoned investor, it’s hard to be resistant to FUD. With crypto markets so sensitive to speculation, a rumor about a crypto ad ban, the threat of the SEC calling Ethereum a security, or a respectable economist labeling bitcoin a bubble can change one’s fortunes overnight.
FUD is dangerous and can cause you to leak money like a hole in a boat, as you sell your stash at a loss, buy new coins at an inflated price, and pay commission fees on every transaction.
Of course, things can go either way but if your trading habits are of a reactionary kind, you’ll continue to sell and buy at a loss—while paying extra to Coinbase. FUD causes overtrading. So, don’t get trigger-happy and remember to HODL in uncertain times.
Falling Victim of FOMO
FOMO is another killer, like the one that got the cat. FOMO causes you to jump on the bandwagon no matter what the price. Which leads to buying at an all-time high, getting less for your money and wanting to disappear into a hole as prices plummet.
Don’t let FOMO push you into making costly mistakes. Take a look at the cryptocurrency you’re buying and its trajectory. Analyze what problems it has and which ones it’s solving. Most importantly, take a deep breath and check yourself before getting in at an ATH.
Believing the Hype
When you’re new to the investing market (and let’s face it, many of us are), it’s easy to get swayed by the hype. Whether that’s a pump and dump scheme that serves to inflate a cryptocurrency’s price and make it look promising, shilling on ICOs, or simply believing rumors.
Buying into the hype can leave your hands full of worthless tokens and your tail between your legs.
Rumors run rampant throughout the crypto community and rumors are rarely true. For the most part, they serve to increase prices and speculation.
In fact, the primary developer of Monero (XMR) once put out a fake rumor about Monero by teasing the community and suggesting that a major announcement was coming up.
The announcement? That there was no announcement. He was trying to show investors why it’s important to stop believing the hype.
Investing With Money You Can’t Afford to Lose
If you’re investing with money that you need for everyday items like food and heating, you’re going to make wrong decisions. Any seasoned investor will tell you never to invest money that you can’t afford to lose (sometimes known as “scared money”).
The psychological pressure is too great when you see the markets twitching. When you can’t afford to lose, you’ll sell at the wrong moment, making a minor loss, then miss out when the prices recover. You’ll probably also give yourself a stomach ulcer or end up getting divorced.
Not Diversifying Your Portfolio
So, you may already have a healthy stash of various crypto coins, but it’s not just your cryptocurrency portfolio that’s important. The cryptocurrency space is still largely unregulated and uncertain and thus it’s always a good idea to diversify your portfolio. So, try getting in on some traditional assets as well as digital ones.
No one can predict cryptocurrency prices with any degree of certainty (even though many have tried). If you’re looking forward to seeing McAfee eating his dick on national television if bitcoin doesn’t go to $500,000, you’re not the only one.
So, just remember that if it sounds too good to be true, it probably is. Research a little, relax a lot and try to think for the long term.
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