Key facts about cryptocurrencies
Investing in cryptocurrencies has become an appealing option for many, thanks to a few success stories. For example, Bitcoin saw a growth of over 500% from the beginning of 2020 to the end of 2021. However, success does not come without risk. It’s vital to be aware of common investor mistakes to avoid losses.
Mistake No. 1: Ignoring education
Many cryptocurrency investors enter the market without understanding cryptocurrencies and the risks associated with cryptocurrency investing. Studies show that informed investors are 60% more likely to make significant returns. It is essential to know concepts such as blockchain technology, market volatility and fundamental analysis.
For example, if you’re looking to invest in Ethereum, it would be good to understand how smart contracts and decentralized applications (dApps) that use it work. A good source of information about what ETH is could be this Youtube video or their official website.
This knowledge can help you make informed decisions and avoid common pitfalls.
Mistake #2: Reliance on custodial platforms
Storing cryptocurrencies on custodial platforms like Binance or Crypto.com may seem convenient, but it comes with risks. For example, in 2020, the KuCoin platform was hacked and funds of around $150 million were stolen.
A safer solution is to use hardware wallets, such as Ledger or Trezor, which give you control over your funds.
Buy cryptocurrencies from well-known platforms such as Abarai, which offer strict security measures.
Mistake No. 3: Failing security measures
Security is top priority in the cryptocurrency world. Statistics show that 50% of investors who don’t use two-factor authentication lose their funds in ways that could have been avoided.
Using safe practices such as advanced security acts, keeping private keys in secure places and avoiding public Wi-Fi networks is essential. Keeping private keys in secure places is as important as keeping your birth certificate or other essential documents safe.
Mistake 4: Investing without a plan
Without a well-defined investment plan, the risk of loss increases. Statistics show that cryptocurrency investors who develop a clear strategy have a 75% chance of protecting their investments in the long term.
Develop a plan that includes investment goals, amounts to invest and clear consolidation or exit strategies. For example, if you want to buy bitcoin at a price of USD 10 000 and you want to sell at a price of USD 15 000, you would be well advised to stick to this strategy because due to emotions there is a possibility that you may not sell as you planned and the value of the cryptocurrency may fall.
A very good source where you can find out the price of a cryptocurrency such as Bitcoin, Ethereum or XRP (ripple) is Bitcoinprice.co.uk
Mistake 5: Following trends
Many investors decide to buy cryptocurrencies that are trending, but not all of them are sustainable. For example, in 2021, many memecoin tokens were growing rapidly, but most of them lost more than 90% of their value in the following month.
Research each cryptocurrency individually, analyze the team behind it and the purpose of the project. Find out how it can bring real benefits to users, not just quick profits.
Final thoughts
Investing in cryptocurrencies can offer great opportunities, but it’s important to be aware of common mistakes that can lead to losses. If you educate yourself, implement robust security measures and create a solid plan, you’ll be able to successfully navigate this dynamic market.
However, the fact that many users choose to store cryptocurrencies on exchanges and don’t have their own wallet can come with many risks. Our recommendation is to install a wallet on your phone (see the article How can I install a bitcoin wallet) and handle the security of your funds yourself.
Maintain a disciplined and educated approach to turn risks into financial opportunities. Be prepared and invest with confidence, built on a solid foundation of knowledge and strategies.