Cryptocurrency is a digital currency that works based on cryptography. Cryptography is the process of converting readable data into nearly unbreakable code.
With cryptocurrency, it’s now easier to transfer funds between two parties because a trusted third party, such as a bank, is no longer required. Consider the situation when you urgently need a loan but can’t obtain one because the bank requires collateral and other restrictions. There’s no such thing as those in cryptocurrency.
However, there’s no central authority in cryptocurrency. As a result, the government can’t interfere with transactions conducted using this method. The disadvantage of this is that there’s no legislation to punish criminal activities in the crypto world.
The popularity of cryptocurrency is growing all the time. There’s a wide range of cryptocurrencies from Bitcoin, Ethereum, Tether, Solana crypto, and more. Therefore, you’re probably tempted to get one as well. But, make sure you’re capable of responding to the volatile nature of cryptocurrency and make sure to avoid these mistakes:
Investing Without A Plan
Pretty sure you’ve heard of cryptocurrency from your friends, families, or bosses. Some might have said that this is a good investment if you want to earn instantly. But it’s not a good idea to invest your money in something just because everyone else is doing it, especially in cryptocurrency.
People often say that their coins will surely go to the moon. Don’t let yourself get swayed by this hype. Before investing in cryptocurrency, it’s best to practice DYOR or Do Your Own Research. By doing this, you’ll be able to devise your own strategy and avoid scams.
When creating your strategy, you must first decide what cryptocurrency you want to invest in. Then decide whether you want to invest for the long term or short term. It’s important to know these things, so you won’t put your money into a pump and dump or a rug pull.
There’s a wealth of information regarding cryptocurrencies available on the internet. You can also watch videos from professionals and users who have a lot of expertise with digital currencies. Take note of their advice and research their money-growing technique. You can create your own plan and approach based on these.
Not Putting Security First
First and foremost, you should remember that cryptocurrency is unregulated. If anything goes wrong, the possibilities of recovering your funds are little to none.
Cryptocurrency uses cryptography to secure transactions, but it’s still not safe from hacks and scams. One way to determine if the transaction is a scam is if it’s too good to be true.
For example, when you receive an email that promises you a double or triple investment return, be skeptical. Remember that there’s no such thing as easy money, even in cryptocurrency.
Another scam you shouldn’t fall for is malicious wallet software. As much as possible, only stick with crypto wallets that have already established their reputation, like Trezor, Ledger, Exodus, and Metamask. You should also use reputable exchanges and avoid using these as your crypto wallet.
Use a strong password for each site and keep it separate from your other passwords to increase your security. Set up two-factor authentication, so no one else can access your crypto without your permission. Even if you don’t have an Internet connection, you should avoid signing into an exchange while using public Wi-Fi.
Buying High And Selling Low
The cryptocurrency market is highly volatile. Many investors make mistakes, especially when they’re just starting out. If you’re buying a cryptocurrency for the first time, be sure you’re aware of its volatility. You might wake up one day to discover that the value of your crypto coin has surged. Then, after a few hours, it dropped to its lowest point.
Investing in cryptocurrency at its all-time high and selling at its all-time low is one of the most common mistakes. There are two possible causes of this mistake. One is FOMO or the Fear Of Missing Out. Suppose you invest in a project that’s now booming. In that case, you have a much better chance of losing money as early investors withdraw their winnings. You may even have to wait a long time to break even, let alone make any money.
The other one is FUD or Fear of Uncertainty and Doubt. This happens when a coin is rapidly declining. Thus, you’re more likely to be tempted to sell it. However, if it’s a solid project and none of the fundamentals has changed, it has a good chance of recovering. You just have to be patient and wait a little more.
If you want to invest in cryptocurrency, you’ll need to think about getting money into the market while limiting the risk. You can’t merely buy coins and sell them when their value drops. When you do this, you’ll more likely lose money than earn.
Investing More Than You Can Afford
One simple rule in cryptocurrency is to invest what you can only afford to lose. As mentioned earlier, cryptocurrency is volatile. Every gain comes with a considerable risk of loss. Hence, you shouldn’t use this as your primary source of income.
You should also avoid investing your savings in this coin. Don’t use this as your fallback when you unexpectedly lose your job. Quit thinking you’ll get your money back right away and make a profit in a short time.
When investing in cryptocurrency, avoid borrowing money. If you don’t have a budget to invest in it, you’re not likely to be able to pay off your debt. If you use a credit card, make every effort to pay it off before the due date.
Your circumstances and risk tolerance depend on how much you invest and where you’ll get this money. Make sure that you’re aware of the risks involved and consider the worst-case scenario. The more you understand cryptocurrencies and the market in general, the less you’ll stress during price fluctuations.
Before fully immersing yourself in cryptocurrency, you must first determine how much money you want to make and the amount of money you’re willing to take a chance with. Doing this can help establish a limit on how much you can only take out of your pocket.
Final Words
It takes a lot of research, patience, and strategy before investing in cryptocurrency. You have to be aware of the risks that come with it, and you have to be prepared.
You have to be wise in distinguishing scams from legitimate sources. Remember that your money is at stake here. It’s not easy to earn that money. Therefore, you should only invest the money you can afford to lose.