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The cryptocurrency rage has not died down—neither do we expect it to die down anytime soon, as market penetration is still quite low. However, investing in cryptocurrency is risky, maybe even more so than investing in anything else and if you are new to this form of investment you should know that a lot can go wrong very quickly.
Cryptocurrency exchanges and wallets are attacked by hackers every day and the market for crypto is still volatile. Even with all of this, the average person has an opportunity to become very wealthy with Cryptocurrency investment as long as they can avoid some common and dangerous mistakes.
Some of the most common mistakes to avoid are;
Lack of research
A lot of people who hear about the rise of Cryptocurrency and how it has made other people instantly wealthy jump on the bandwagon without looking twice. There is a lot about cryptocurrency that one must know before deciding to invest. It is essential to learn the best and safest exchange platforms, the best wallet platforms, the popular coins and the coins that are rising and doing well and so many other things. Without adequate knowledge of all these factors, you are more likely to lose money than to make it. There are several websites and articles solely dedicated to Cryptocurrency all over the interwebs; there are youtube channels and even books about investing in Crypto so there’s a lot of information out there and you should arm yourself with it.
Forgetting to backup keys and passwords
If you use a smartphone, personal computer, tablet or another device, then you are familiar with the need to backup information and the process of doing so. Technological devices can be unreliable, they can be stolen or lost, and they can be changed and when any of these happens, if your information is not stored somewhere, either in the cloud or somewhere safe then you will lose it. Some type of information can be easily retrieved, and without consequences, Cryptocurrency information is not one of them. When you lose the keys or passwords to your wallet or your exchange, then your money is lost forever. Admittedly it is a weak spot for these exchanges and websites but Cryptocurrency is relatively new, and there is still a lot of work to be done. When you register on any exchange or wallet, save your keys and passwords elsewhere, activate two-factor authentication, have a backup password and back up phrases and write them down and keep them in a safe if necessary. If there is a lot to lose then you should not take any chances.
Refusing to diversify
The best way to make a lot of money from cryptocurrency is to avoid focusing on one coin. Bitcoin is currently the most popular crypto coin out there, and a lot of people put all of their eggs in that basket, and when it crashed, their funds went tumbling with it. The same method you apply with any investment is what you should apply to cryptocurrency. Buy other coins such as Ethereum, Doge, Bitcoin cash, Ethereum classic and a thousand other available coins. Watch the market and follow the trends and soon you will be doing exchanges and making more money.
Don't Hodl
When a stock is crashing, you sell instantly, if you foresee that it will collapse in the immediate future, you sell as soon as you can why should you hold on to a coin that is crashing? When you decide to invest in Bitcoin, you should know that you will need to be on your toes and be ready to move money around. Sell a failing coin and buy a rising one and when that one is set to fall, you sell again and buy another one, and the cycle continues. That way you are safe when it all comes crashing down.
Falling for fomo
Fomo is the ‘fear of missing out’, and everyone falls for it every once in a while. It is acceptable to fall for fomo when the subject is your social life, but when it comes to investing, you need to stay strong and firm. If you buy a coin you know will do well in a couple of years then you should hold on to it. It does not matter if the progress is slow, as long as it moves then you should be fine. You can hold on to the coin for a couple of years before you let go but what you should not do is invest in a coin just because other people are doing so, look, do some research, then leap.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.