Investment is not an easy activity. It is an art that requires dedication and skill. This is very true in the case of cryptocurrencies. The crypto market is still in its growth phase and is highly volatile. Therefore, the value of crypto assets fluctuates according to the manipulation of big whales, liquidity, and the influence of social media.
Every year, many new investors enter the market and the unpredictable condition of the market takes away the money they invest in. The crypto market is extremely unregulated, which encourages scammers to take advantage of inexperienced investors. This lack of experience will force naive investors to make mistakes in their crypto investments, leading them to lose their money. Below are some common mistakes investors can avoid while investing in cryptocurrencies.
- FOMO Or Fear Of Missing Out
The FOMO or Fear Of Missing Out is considered to be a psychological factor that forces investors to make spontaneous decisions. Mostly, FOMO forces investors to buy crypto tokens at high prices fearing that they won’t miss out on more gains. When the prices become normal, this move will lead to losses. FOMO can also lead investors to fall for scams. Many investors buy unworthy tokens fearing they will miss the chance. To avoid this, you must follow your long-term strategy and buy only worthy cryptocurrencies to include in your portfolio instead of running behind short-term profits. You should be careful about the risks you undertake while investing in unproven and new projects.
- No Research Before Investing
You must have a good understanding before investing in a crypto asset. Cryptocurrency is volatile and complex. Therefore, you have to educate yourself before investing. Many investors make the mistake of not researching before investing their money in cryptocurrencies. It will lead you to danger. Therefore, study the project, its team, the opportunities it has in the market, and the competition it has to undergo. Then, you can decide on investing in it.
- Investing What You Can’t Afford To Lose
You have to ensure that you invest only the money you are ready to lose. Cryptocurrencies are highly volatile. It might attract you with glittering gains, but huge losses are also part of the game. When the crypto market cap is low, risk and volatility will be higher. Your risk tolerance and personal experience play a big role in deciding the returns you will get. So make sure you understand the risks involved in the investment and the worst situation that may happen.
- Not Diversifying Your Portfolio
Putting all your eggs in a single basket can be fatal in investment. Many beginners make the mistake of investing all their money in one cryptocurrency or trying to trade just a few of them. It can be risky because when the price of that particular asset goes down, you may lose all your money. To eliminate this risk, you may diversify your portfolio by investing in various crypto assets. Thus, you can compensate for the loss in one asset with another.